There is a striking difference between the Americans who own stocks and those who don’t. People who own stocks are further pulling away from those who don’t. This was made clear in the rather bizarre year 2020, wherein while the economy was struggling, Wall Street was breaking records reaching new heights. Surprisingly, this time, Wall Street has been sympathetic to Black people which usually doesn’t happen that often.
More often than not, black people have always steered clear of the stocks and mutual funds, and consequently, many African Americans with solid incomes have lagged far behind the whites in wealth accumulation. While the stock market last year was favoring most people who decided to take part in this lucrative field, a large share of the people who missed out on the action, unfortunately, were the blacks. According to a data report released by the Federal Reserve in 2019, only 33.5% of the Black Households owned stocks. That compared with the 61% for the whites shows the stark difference between these two demographics.
But there is a reason for that, chief among them being the avoidance of a 2008 incident happening again. African American households have been known to prefer safer places to put their investments. “We didn’t have a grandfather or aunt or uncle or mom and dad educating us on the markets because they didn’t benefit from it because of historical discrimination in this country,” said John Rogers, founder, and co-CEO of Ariel Investments. In so many instances, Black people have been blatantly denied the opportunities to build their wealth by parking it in the market and watching it grow. And also, the fact that the majority of them have lesser incomes, they are often torn in between to take care of the family or to invest, and the latter takes precedence. In addition, many often work in jobs that do not offer retirement plans.
But lately, we have been seeing the Black stock investment on the rise with the 401 (k) plans making most African Americans less reluctant, than the past generations about investing. If this trend continues, there is a high likelihood of bridging the wealth inequality gap that for generations has existed between the whites and African Americans.
Just last year alone, while a good number of Black households missed the lucrative gains from Wall Street, some investors decided that it was about time to support the black-owned businesses during the Juneteenth Celebrations. The shares of big companies like Broadway Financial Corp., Urban One Inc., and Carver Bancorp Inc., were traded so heavily that they all had to put on hold to avoid volatility. This and so many other cases show that the African American community is ready to ‘up-its-sleeves’ and grab the opportunities in the stock market.
According to the Urban Institute, the African American community has on average $19,049 in liquid retirement savings, compared to the $130,472 for the Whites and $12,329 for the Hispanics. The Economic Policy Institute data for median and average wealth for the non-Hispanic whites and the African Americans show that the median wealth for the non-Hispanic whites is $95,261 and the median wealth for the African Americans is only $11,030.
Like previously mentioned, another reason why African Americans do not invest is that they do not have enough money to invest. With only 44 percent of African Americans indicating having no money to invest as the chief reason for not investing, African Americans are also more likely than the white people to say that it is more important to get the timing right for the stock market investing, although financial advisers argue that the key to successful investment is combining the stocks and the bonds and continually investing a little at a time.
It is also important that African Americans realize that they don’t have to take the plunge into the stock market alone. Consider taking lessons in investment, hiring a certified financial planner, or even joining an investment club. It is important to design an investment strategy in the stock market that has your specific investment goals in mind. Remember, investment education does not require you to be rich, accessing information today is free. Soak up as much information as you can, the more the African Americans educate themselves on investments in stocks, a tremendous improvement in the Black Finances over the next generation will be inevitable. Remember, when your finances are really good, you can spend your time and money helping other people as well as yourself.