Places Where Residents Invest the Most - 2020 Edition

A relatively small proportion of the U.S. population is selling securities like stocks or bonds to make money. Of the roughly 140 million tax returns reporting income and filed with the IRS in 2017, only about 24 million reported capital gains, which is income earned through selling investments or property. This indicates that, whether from lack of savings or information, the majority of Americans do not actively invest. 

Despite the low instances of investing nationwide, there are some places where residents are taking advantage of stock market gains and rising property values. In this study, we uncovered where residents are investing the most. Using data from the IRS and the Census Bureau, we compared 100 of the largest metro areas in the U.S. across three metrics. Those metrics include investment income as a percentage of overall income, percentage of tax returns with capital gains income and average investment income as a percentage of annual housing costs. For more information on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below. 

This is SmartAsset’s second annual study on places where residents invest the most. Check out the 2018 rankings here.

Study Definitions

We considered investment income as income coming from ordinary dividends, qualified dividends or capital gains. Definitions for the three types of investment income are below:

• Ordinary dividends. This is income earned from ownership of stock in a company.
• Qualified dividends. This is similar to ordinary dividends, except that they have been owned long enough to meet the IRS holding period qualification.
• Capital gains. This is income earned via selling capital assets. This can include your home or your car, but also includes stocks and bonds.

Key Findings

• Consistency over the years. The places where residents are investing the most do not seem to fluctuate significantly between years. All 10 metro areas in this year’s edition of our study also ranked in the top 10 last year, albeit in a different order.
• Large differences across metros. The extent to which residents invest varies significantly across metro areas. More than 15% of overall income comes from investments for nine of the metro areas in our top 10, while only about 3% of income comes from investments in our lowest-ranking metro area, McAllen-Edinburg-Mission, Texas. Similarly, there is a wide range for both the percentage of tax returns with capital gains income (4% to 30%) and the average investment income as a percentage of annual housing costs (15% to 170%).

1. Bridgeport-Stamford-Norwalk, CT

Bridgeport-Stamford-Norwalk, Connecticut ranks in the top 3% of metro areas for each metric we considered. More than 20% of overall reported income in the area came from investments and about 29% of tax returns reported capital gains in 2017. The Bridgeport metro area also ranks first in the study for our third metric - average investment income as a percentage of annual housing costs - which we included to account for the cost of living in each area. The 2017 average investment income (including reported income from ordinary dividends, qualified dividends and capital gains) was almost $40,000 for Bridgeport area residents, far outpacing 2018 median annual housing costs of $22,404.

2. North Port-Sarasota-Bradenton, FL

More than 23% of reported 2017 income in North Port-Sarasota-Bradenton, Florida came from investments, the second-highest percentage for this metric of any area, following only Miami-Fort Lauderdale-West Palm Beach, Florida. Moreover, of the almost 400,000 returns with income filed, 107,570, or about 27%, reported capital gains. Like in the Bridgeport, Connecticut metro area, average investment income significantly outpaces median annual housing costs in the North Port metro area. We found that average investment income as a percentage of housing costs was 161%, the second-highest percentage for this metric in our study.

3. San Jose-Sunnyvale-Santa Clara, CA

Many residents in the San Jose, California metro area seem to be invested in the stock market. About 31% of returns reported capital gains income, the highest figure for this metric across any of the 100 metro areas in our study. This metro area ranks fifth overall on our two other metrics, investment income as a percentage of overall income andaverage investment income as a percentage of annual housing costs. About 20.8% of all reported income came from investments, and average investment income outpaced median annual housing costs by about 116%. 

4. San Francisco-Oakland-Hayward, CA (Tie)

Just north of the San Jose metro area, the San Francisco, California metro area ranks in the top 6% of metros on all three metrics and ties with the Cape Coral, Florida metro area for fourth place in our study. It had the third-highest percentage of 2017 returns reporting capital gains income, at 27.5%, of any metro area in our study. Additionally, about 18% of income in the area came from investments, and average investment income was about 93% of median annual housing costs. 

4. Cape Coral-Fort Myers, FL (Tie)

Tied for fourth place with the San Francisco metro, Cape Coral-Fort Myers, Florida is home to many residents who invest their money. Almost 23% of tax returns reported income from capital gains in 2017, the eighth-highest percentage for this metric across all 100 areas in our study. Additionally, average investment income as a percentage of annual housing costs, at about 135%, is the third-highest in our study.

6. Boston-Cambridge-Newton, MA-NH

For tax year 2017, average investment income in Boston-Cambridge-Newton, Massachusetts-New Hampshire was about $18,500, which covers almost 90% of median annual housing costs in the area. The Boston metro ranks seventh-highest relative to all metros in our study for the other two metrics we considered, investment income as a percentage of overall income and percentage of tax returns with capital gains income. In 2017, about 17% of overall income in the area came from investment income including ordinary dividends, qualified dividends and capital gains, and 22.7% of tax returns reported capital gains income. 

7. Seattle-Tacoma-Bellevue, WA

Seattle-Tacoma-Bellevue, Washington ranks in the top 10% of metro areas in the study for all three metrics. Specifically, investment income as a percentage of total income is the eighth-highest, at about 16%; percentage of tax returns reporting capital gains is the sixth-highest, at about 23% and average investment income as a percentage of annual housing costs is the 10th-highest, at about 81%. 

8. Austin-Round Rock, TX

When it comes to percentage of tax returns with capital gains, Austin-Round Rock, Texas ranks 19th, the lowest of any metro area in our top 10. But it ranks in the top 10% of all metro areas for the other two metrics in our study. About 16% of reported income came from investments in ordinary dividends, qualified dividends and capital gains in 2017. Furthermore, average investment income came close to covering median annual housing costs in the area, at around 86%. 

9. New York-Newark-Jersey City, NY-NJ-PA

Despite high housing costs in the New York-Newark-Jersey City metro area, average investment income there comprises almost 77% of median annual housing costs. Specifically, average 2017 investment income for residents in this metro area was $15,119, and 2018 median annual housing costs were $19,656. Investment income as a percentage of all income is also the 10th-highest in the New York metro area of any area in our study, at 15.4%. 

10. Durham-Chapel Hill, NC

Though only about 11% of overall income in the Durham, North Carolina metro came from investments in 2017, about 58,000 of the total 284,850 returns with income (an impressive 20.43%) had capital gains. Moreover, average investment income makes up more than half of median annual housing costs in the area, at about 65%. 

To rank the metro areas where residents invest the most, we looked at data for 100 of the largest metro areas in the U.S. We compared metro areas across the following three metrics: 

• Investment income as a percentage of overall income. This is total investment income, including income from ordinary and qualified dividends and capital gains, as a percentage of income. Data comes from the IRS and is for 2017.
• Percentage of tax returns with capital gains income. This is the number of tax returns reporting capital gains income divided by the total number of tax returns reporting income. Data comes from the IRS and is for 2017.
• Average investment income as a percentage of annual housing costs. This is the average investment income divided by median annual housing costs. Data on average investment income comes from the IRS and is for 2017. Housing cost data comes from the Census Bureau’s 2018 1-year American Community Survey.

To create our final rankings, we ranked each metro area in every metric, giving an equal weighting to all three metrics. We then found each area’s average ranking and used the average to determine a final score. The metro area with the highest average ranking received a score of 100. The metro area with the lowest average ranking received a score of 0. 

Note: There is some variance between Census Bureau and IRS metro area names. Our list follows Census Bureau designations.

Tips for Maximizing Your Investments

• Start as early as possible. Investing can be a great way to maximize your savings for retirement. One way to get the most out of your investments is by starting early. By planning and saving early you can take advantage of compound interest.
• Don’t forget about taxes. It’s easy to focus on the gains you’ll make after selling assets, but remember that you have to pay taxes on those gains. Speak to your tax preparer or a financial advisor to understand the overall tax implications.
• Consider professional advice. A financial advisor can help you make smarter financial decisions to be in better control of your money and get previous debt under control. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

Questions about our study? Contact us at press@smartasset.com