Half of all U.S. households and one in three individuals now own equities, according to a new survey released by the U.S. Investment Company Institute and the U.S. Securities Industry Association.

Nearly 57 million U.S. households own stocks directly or through mutual funds, according to the survey. The growth in equity ownership among America’s individual investors has been largely fueled by the expansion of defined contribution retirement plans, particularly 401(k) plans, they report.

Between 1999 and 2005, the number of households owning equities through employer-sponsored plans, which often offer stock mutual funds as investment options, grew by 5.2 million, to 37.6 million.

“We have become a society of equity investors and defined contribution retirement plans play a central role in introducing Americans to equity investing,” said Sandy West, director of market policy research at ICI. “Today, almost half of all equity owners made their initial equity investment by purchasing stock mutual funds through these plans.”

“Americans clearly understand the benefits and value of investing in equities to reach their long-term financial goals,” noted Frank Fernandez, senior vice president of the Securities Industry Association. “Despite experiencing a market contraction that was one of the worst bear markets since the Great Depression, the number of individuals in the U.S. owning equities is up 5.2% since 2002, and up 14.4% since 1999.”

The research survey finds that equity investors tend to be middle-aged, with moderate household incomes and financial assets. The “average” equity investor is married, 51 years old, college-educated, employed, and is saving for retirement. Ninety percent of equity investors own stock mutual funds and nearly half own individual stocks.

Defined contribution plans are an important source of growth for equity ownership. More than six out of every 10 equity investors under age 35 initially purchased equities through stock mutual funds in retirement plans at work. In contrast, the majority of investors age 65 or older made their initial equity investments outside employer plans. As a result, there are clear generational differences among America’s individual investors with regard to the types of equities held and the tax status of these investments.

Two-thirds of all equity investors in 2005 are between the ages of 35 and 64, the peak earning and investing years. Younger investors typically seek asset accumulation as an investment focus, while older investors have a greater demand for income-producing investments and wealth management.

The survey also found that nearly all equity owners in 2005 follow a buy-and-hold investment philosophy and view their equity holdings as long-term investments. However, equity investors today are somewhat more conservative financially than they were six years ago, likely in response to the 2000–2002 bear market. Although equity owners are more cautious about investment risk today, their equity holdings continue to account for more than half of their household financial assets.

While the increase in the number of investors holding equities through retirement plans at work has driven the growth of equity ownership, nearly three-quarters of all equity investors hold equities outside these plans. Professional financial advisers are the main conduit to equity ownership outside employer plans. More than three-quarters of investors who hold equities outside employer-sponsored plans in 2005 own equities purchased through advisers.

The ICI/SIA study is based on interviews of 4,927 household financial decision-makers, which were conducted in January 2005.

The study is available on the SIA Web site.