The largest group of new stock market investors come from the African-American community.
A new day has arrived for many in the African-American community.
Thanks to social media platforms, mobile apps and more open discussions about finance, African-Americans, especially those from the younger age group, have become the largest group of new investors in the stock market.
“You’re seeing topics of money and investing coming up at the dinner table slightly more among Black families than they ever had before,” said Arielle Patrick, the chief communications officer for Ariel Investments.
According to the Wall Street Journal, almost 40 percent of African-Americans owned stocks in 2022.
In 2016, only a third of African-Americans owned stock.
A survey conducted by Ariel Investments and Charles Schwab found that much of the growth has come from those under age 40.
Based on the survey, approximately 70 percent of African-Americans under age 40 have invested in stock compared to 60 percent of their White counterparts from the same age group.
The Grio reported, “Also fueled by mobile apps, commission-free trading, participation in 401(k)s, crypto, meme stocks, and social media, experts noted young Black investors’ increased access to financial tools.
“Despite the notable amount of Black stock buyers, the Federal Reserve’s 2022 Survey of Consumer Finances data suggests that the amount of money put into stocks is still small. As previously reported by The Grio, the median wealth for Black families increased by 60% between 2019 and 2022. Yet, Black families’ median wealth is still $240,100 less than the median wealth of White families.
“Though Black people may not be putting as much money into their stocks, the group’s desire to buy stocks and make good investments continues growing thanks to social media, according to the FINRA Investor Education Foundation.”
The study also found that when African-Americans wanted to learn more about investing in stocks as well as other financial investments, three quarters turned to family members, friends and colleagues.
Additionally, the study found a majority of African-American investors also turn to social media and online message boards for advice.
FINRA Foundation president Gerri Walsh said, “With a large number of young investors entering the market, financial education leaders will need to adapt, including providing relatable and trustworthy resources on channels these new investors use. While conducting this research, we learned from investors of color about barriers they or their families faced previously in building wealth through investing.”
While many social media influencers have gained large audiences giving investment tips on platforms like Instagram, many financial advisors believe they encourage followers to invest in riskier stocks like meme stocks than they would.
Many financial advisors advise investors to put more of their money in traditional index funds for beginners.
The Grio added, “Some investors, like sales representative Calah Beale, have lost money following social media’s suggestions, the (Wall Street Journal) reported. Meanwhile, others like college student Noah Reese told (Wall Street Journal) that they used a mix of trusted sources like Benjamin Graham’s ‘The Intelligent Investor’ and YouTube videos by investment influencers.”
Beale said, “At the time, I thought I was making a good financial decision.”
She said that she lost $10,000 from her savings when her meme stock investment dropped in value.
Despite the constant reality of financial losses from stock market, the increased involvement of African-Americans is a far cry from 2020 when the Associated Press reported that although stocks were rising at the time, many from the African-American community were missing out on huge financial gains.
On Oct. 12, 2020, the Associated Press’ Stan Choe reported, “Americans who own stocks are pulling further away from those who don’t, as Wall Street roars back to record heights while much of the economy struggles. And Black households are much more likely to be in that not-as-fortunate group that isn’t in the market.
“Only 33.5% of Black households owned stocks in 2019, according to data released…by the Federal Reserve. Among White households, the ownership rate is nearly 61%. Hispanic and other minority households also are less likely than White families.
“Many reasons are behind the split. Experts say chief among them is a longstanding preference by many Black investors for safer places to put their money—the legacy, some say, of decades of discrimination and fear. Also, many were never taught what they were missing out on.”
Only a few short years later, fewer African-Americans are missing out on the current booming stock market.
The stock market has been breaking records recently as the economy continues to defy expectations.
Although inflation is still a problem for many Americans struggling to make ends meet, the economy is adding jobs and the stock market continues to thrive.
But the news that younger African-Americans are investing in the stock market bucks the stereotype of African-Americans being more consumer than business owner.