PeopleProfitsPensions.com

By: Robert F. Abbott

In my last post, I talked about pension funds and mutual funds as the 800 pound gorillas of the investing world, as dominating the stock markets.

So, how many many people have become investors, or indirect owners of big business by saving for retirement? How big are the pools of money created by modest investments in pension funds and mutual funds?

The answer is summed up nicely in this introduction to an INSEAD Knowledge article titled, The Value Creation Imperative…

“It’s been just over 400 years since a Dutch company became the first organisation to sell shares and became publicly traded. By 2007, more than one billion people owned a stake in the world’s companies worth more than $75 trillion.” (INSEAD Knowledge, February 27, 2008)

Needless to say, that’s an incredible number of people, and an astounding amount of money.

Starting with the head count, at one billion people, we’re talking about a group that’s more than twice the size of the USA and Russia combined. It’s slightly less than the total population of India (1.1 billion people).

If we try to put the amount into context, well, quite frankly it isn’t easy. How do you imagine a trillion dollars, let alone $75 trillion? Let’s start by thinking of it this way: You win a million dollars in the lottery, a million times. So a trillion, quite simply, is a million times a million. Then multiply that by 75 to get the total amount invested by working people like you and me.

It’s really quite an incredible story, especially when you consider that until just a couple of hundred years ago, almost everyone in the world measured success by not starving to death. It’s hard to imagine now, at least for most of us who live in the developed world, but until about the year 1800, our ancestors lived like the poorest people in Africa live today.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

By: Robert F. Abbott

Any contemporary discussion about stock markets must now include references to institutional investors.

Institutional investors have a tremendous amount of clout in the markets (although they often argue they don’t have nearly enough). By buying and selling huge volumes of shares, they can literally move stock markets up and down.

And who are these these institutional investors, these giants of the stock markets? Essentially, they are you and me, anyone who saves for retirement through pension funds, mutual funds, and some life insurance policies.

Every time our employer deducts a few bucks from our pay check under the line item Pension (and perhaps contributes an equal amount), we’re part of institutional investing. Every time we invest a few dollars by buying mutual funds, we’re adding to our stake as institutional investors.

You see, pension funds and mutual funds take that money of ours and invest it on our behalf. Or invest at least some of it. They may withhold some to pay pensions to current retirees or to cover mutual fund management fees, and so on.

But they still have some money left for investing. While our individual contributions to pension funds or mutual funds may be small, even as little as a few dollars a month, there are an awful lot of us, about a billion people around the world now. And, we’re almost all institutional investors, because we invest through pension funds and mutual funds.

So, collectively, we are institutional investors, and we’ve become the giants of the modern investment world.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.