CBx Daily

Is the Narrowing Investment Gap Being Driven By Riskier Transactions?

By Ariel Solomon - The investment gap between races is narrowing with 68% market participation from Black Americans under 40 - Black Americans are taking on riskier investments with 25% invested in cryptocurrencies Black Americans have faced systematic exclusion from a number of American institutions including investment opportunities, though that could be changing. The investment gap between Black and white Americans has recently narrowed, with higher stock market participation among young Black people under 40. In an effort to take back power, interest in investing has grown as this demographic has developed a propensity to take on riskier investments.

May 2, 2022

By Ariel Solomon

  • The investment gap between races is narrowing with 68% market participation from younger (under 40) Black Americans
  • Black Americans are taking on riskier investments with 25% invested in cryptocurrencies

Black Americans have faced systematic exclusion from a number of American institutions including investment opportunities, though that could be changing. The investment gap between Black and white Americans has recently narrowed, with higher stock market participation among young Black people under 40. In an effort to take back power, interest in investing has grown as this demographic has developed a propensity to take on riskier investments.  

Why This Matters: Young Black Americans, 68% versus 57% for younger white Americans, are taking on higher risk investments, including crypto. Specifically, 25% of Black Americans currently own cryptocurrencies, compared to 15% of white investors according to the Ariel-Schwab Investor survey.

The primary way that Americans build wealth and invest is through retirement plans, but given that Black Americans often hold jobs where employers are unlikely to offer sponsored plans, this path is often out of reach. In fact only 44% of Black Americans have retirement savings accounts, compared to 65% of white Americans, with balances that amount to 40% of their white counterparts’ ($20K vs. $50K).

Situational Awareness: While many say that money equals power; it is equally quoted that knowledge is power. One without the other can be dangerous. “The [….] appetite for risky investment options, and alarming lack of knowledge about fundamental investing principles is a red flag about the critical need for greater investor education,” said Melody Hobson, President of Ariel Investments. This will be the critical step in unlocking long-term financial security, building wealth, and ultimately closing the racial wealth gap in America.

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