If Bill Gates or Elon Musk walked into a room of 100 people, it would not matter who those 100 people were—the average person in that room is now a billionaire. Similarly, the average net worth of a household in the U.S. is about $1 million, according to Federal Reserve data. In other words, the average net worth of Americans is inflated by a small number of ultra-wealthy families.
Taking that “so a billionaire walks into a bar” setup one step further, you can see how the median (the midpoint) is a better representation of household net worth in the U.S. than the average. The median household’s net worth is $192,000. That gap explains why it makes more sense to examine averages in tranches (e.g., the top one percent or 10 percent) rather than for the entire group, but then to compare those averages to the median.
How does the median household net worth compare to the wealthiest American families? A graphic courtesy of Diane LuTran’s YouTube channel is a helpful visualization, especially when considering the difference between the average and the median.
The top one percent of the wealthiest Americans have a net worth of around $11.6 million to $13.7 million, according to the Federal Reserve Bank of Richmond. The top 0.1 percent “only” have a $62 million net worth (“only” in relation to the billionaires). The top 10 percent enjoy annual incomes of $173,000 and quintuple the median net worth. LuTtran describes these tranches as follows:
- Top 25 percent: Net worth ranges from approximately $340,000 to $500,000, with an income of around $95,000. This group includes teachers, engineers, and nurses—people who consistently save and build wealth over time. However, many people still feel vulnerable to emergencies, underscoring the importance of having an emergency fund that covers three to six months (or more) of expenses.
- Top 10 percent: Net worth between $970,000 and $1.9 million, with incomes over $173,000. Occupations include doctors, lawyers, and executives. Much of their wealth is tied up in illiquid assets like homes and retirement accounts (home equity makes up 28 percent of wealth; including retirement savings, that figure jumps to 62 percent). Despite appearing wealthy on paper, many do not feel financially free due to limited liquidity.
- Top five percent: Net worth ranges from $1.1 million to $3 million, and their income averages $340,000. This stage marks a psychological shift where income alone no longer equals freedom. Individuals here focus on ownership, equity, and investments that generate passive income. Many are in their 50s or older, transitioning from wealth accumulation to preservation and asking how to protect and sustain their wealth.
- Top two percent: Net worth between $2.7 million and $5 million, with incomes around $500,000. This group features entrepreneurs, corporate leaders, and seasoned investors. Wealth becomes strategic, emphasizing tax efficiency, diversification, and legacy planning. However, this level presents new challenges, including decision fatigue, pressure, and responsibility.
- Top one percent: Net worth is approximately $11 million to $13 million. Nearly 80 percent are self-made, having built wealth through the ownership of businesses, real estate, intellectual property, and portfolios. Their money “works harder than they do.”
- Top 0.1 percent: Average wealth exceeds $62 million, comprising about 130,000 households in the U.S. These include founders, hedge fund managers, entertainers, and multi-generational families whose wealth compounds through private markets and inheritance, influencing industries and public policy. The leap from the top 10 percent to this bracket is exponential and driven by access to time, networks, and opportunities.
Are there any key takeaways from this? Information is generally beneficial to have. But if you need an action item, it is mindset. Contrary to popular belief, most millionaires (79 percent) are self-made, rather than being “trust-fund babies.” They are disciplined savers and invest wisely. They also employ asset and income protection strategies and utilize a financial advisor for tax planning to legally avoid taxes (as opposed to simply using an accountant for tax filing and compliance).
What’s up with the stock market?
Some investors are becoming wary of the stock market, citing narrow leadership. I can see how that feels nerve-wracking to investors who value capital preservation. However, not because narrow leadership is inherently a problem, but rather because the media reports on it as if it is a massive negative for stock market sustainability, without providing any context for why. (For the record, it absolutely can be a red flag, but that would require a much more nuanced discussion about the direction and speed of travel, and that is just not what is happening now, so I will save that conversation for another day.)
A little less than 30 percent of the stocks in the S&P 500 have outperformed the index in 2025. Is that normal? Since 1990, only about 48 percent of the S&P 500 stocks beat the index in any given year. An increasing concentration of stocks pushing up an index is often indicative of a late-cycle, large-cap rally, so it is not abnormal. Not abnormal, but perhaps worrying—however, there is no timing the end to that. For instance, in 2023, the term “Magnificent 7” became a reference to describe a group of seven high-performing technology companies that had significant influence over the broader stock market’s performance. Investors back then feared that the concentration of returns in these and a number of other stocks meant that the end was near for the market.
As with the 2025 year-to-date data, fewer than 30 percent of its stocks beat the S&P 500 in 2023 and 2024 (less than the typical 48 percent). Not only were those years good for the market (both exceeding 20 percent returns), but the market also performed well in the following year.
Often, like in 2025, it is only a handful of Mega-Cap stocks that account for much of the S&P 500’s gains, making it challenging for the average stock to outperform the index. Because the index is market-cap weighted, the largest companies have an outsized influence. Investopedia cites that it is not uncommon for three quarters of the S&P 500’s returns to be linked to only 50 to 75 of the stocks in the index. However, that is likely being generous.
One study showed that from 1991 to 2020, only 2.4 percent of the U.S. stocks accounted for all of the net worth creation in the U.S. stock market over that period. I do not see a threat to the market based on the current consortium of stocks that are lifting the index. Now, of course, fundamentals can change and affect the leaders, but that is not the same as the technical concerns. All of these leading stocks could crash tomorrow, with their decline having nothing to do with concentration risk—those investors could be “right” for all the wrong reasons.
Here is my most straightforward advice for investors in a world where not as many stocks beat the market as you might expect: Do not pay your financial advisor a two percent fee if all they are doing is picking stocks for you. Because if you are only interested in performance, you might as well buy an inexpensive S&P 500 exchange-traded fund and hold onto it for the long term.
Yes, I make money investing other people’s money, and, yes, I am saying that many investors would be better off not lining my pockets. That is the point—I am not special, and neither are most stock pickers, based on the evidence. According to the SPIVA Scorecard, about 88 percent of all large-cap funds underperformed the S&P 500 index. And it is safe to assume that those giant mutual fund companies have deeper resources than your local broker or me.
Any outperformance seems to depend as much on luck as skill. According to S&P Global, not a single fund from the top quartile of actively managed funds within all reported domestic equity categories remained in the top quartile over the next four years. They go on to explain that the results were not much improved when lowering the bar from the top quartile to the top half. The exhibit below shows the percentage of top-half actively managed domestic equity funds consistently remaining in the top half over a five-year period.
The percentage of funds continuing their outperformance was less than a random distribution would suggest, meaning that results are at least as likely to be due to luck as skill.
That all goes back to the richest Americans and those who want to climb the net-worth ladder. Patience over stock picking prevails; tax strategy is paramount; and income and asset protection keep investors from having to dig out of holes they did not need to be in.
Does the performance of your portfolio matter? One hundred percent! However, trying to get too cute about which stocks to hold and when often matters less than the overall plan for the portfolio. The key to successful investing seems to be less about which stocks to own and more about getting out of the market to avoid a recession-led stock market crash. At least that is what I try to do.
Allen Harris is an owner of Berkshire Money Management in Great Barrington and Dalton, managing more than $1 billion of investments. Unless specifically identified as original research or data gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Advisor’s clients may or may not hold the securities discussed in their portfolios. Advisor makes no representation that any of the securities discussed have been or will be profitable. Full disclosures here. Direct inquiries to Allen at AHarris@BerkshireMM.com.
