By Jeanette Brown
- Black Americans who own stocks as of 2022 increased to nearly 40%, a rise from just under one-third in 2016
- White households still significantly outpace Black Americans in both assets and market participation, with their median wealth reaching $285,000, in stark contrast to $44,900 for a black family
Historical and systemic barriers might contribute to differences in access to traditional financial resources but blacks are changing this narrative by using the available resources for their development. A recent study found that over 50% of black investors showed a higher inclination to utilize social media groups or message boards for obtaining investment information, whereas only 25% of white investors exhibited a similar preference. These tools make researching, critically assessing, and buying shares easier.
Why This Matters: The cultural, structural, and economic investment barriers have changed. Previous generations were raised in different social, political, and technological times. Blacks, specifically, encountered historical conditions that affected their economic, legal, educational, and social status. However, the desire to improve a community’s financial status and build wealth dates back to the African proverb – each one, teach one; which originated in the United States during slavery when Africans were denied education. When someone learned how to read or write, it became their responsibility to teach someone. The idea is to spread knowledge for the betterment of your community.
Black investors, particularly the younger generation, now enjoy greater accessibility to financial information leading to greater willingness to take risks in the stock market compared to the older generation. Digital technologies are redefining industries and evolving historically marginalized communities. The proliferation of mobile apps and online trading platforms has made it easier than ever for individuals to participate in the stock market. This could see the market participation gap close earlier than expected.
Situational Awareness: If we’re going to catch up or close the generational wealth gap, the increase in black investors as a group owning stocks is a good benchmark. Increased participation in the stock market can be positive for wealth-building. Investing always carries risks but continued efforts by the financial industry to address diversity and inclusion issues may create an environment that is more welcoming and supportive of black investors. This measure of progress is based on an insight received from previous generations.
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