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Why Some People Invest and Others Don't

What makes some people more inclined to invest than their peers?

Overall, people invest to achieve their financial goals, because they enjoy it, or some mix of the two. But almost everyone has financial goals (and likes to do things they enjoy), so why do some people with the means and resources to do so decide to invest, while others don't?

Our researchers found that there are other factors at play that determine who is more likely to invest.

Morningstar recently published the results of research with the goal of better understanding what these factors are. It's a nationally representative study of over 1,000 people (both investors and noninvestors) that looks at the psychological predictors of investing. You can find the full report here.

The research found that some obvious factors were at play in whether people invest or not, such as income and age. But what's different about this study was its examination of what's going on inside of people's heads, including their self-identity as an investor, the emotions they feel around investing, and their focus on preventing bad outcomes or achieving good ones.

So, Who Invests?

Based on Morningstar's research, there are some distinct key factors that make some people more likely to invest than others--one of which is how they identify themselves. People who self-identify as investors are much more likely to invest in individual stocks, exchange-traded funds, and cryptocurrencies than the broader set of people who only have retirement accounts. 

People who consider themselves investors are also often older Americans, higher-income Americans, and those with a longer time horizon. These groups all tend to invest across multiple asset classes.

After identity, other important factors that determine whether someone will invest are income and interest. To put it simply, it's not just a matter of having the funds to invest. One must also have an interest in investing and being more directly involved in reaching financial goals.

Overall, people who invest differ in how they think about their goals and plan for the future when compared with those who are satisfied with being automatically enrolled into a retirement account by their employer.

Understanding New Trends in Investing

While it's true that higher-income and older Americans are more likely to invest, there's plenty to discover about the investing habits of lower-income and younger Americans as well.

For example, approximately 28% of respondents reported having owned cryptocurrencies. The sample is somewhat biased toward lower-income Americans, but, nevertheless, that is an astoundingly high figure and one worth looking further into. As a result, we've conducted another study where we take a closer look at cryptocurrency investing to see what we could learn.

It's an interesting study and helps us think about investing as more than a matter of dollars and cents.