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Gap Between Black and White Investors Narrows As Stock Ownership Hits Historic Low

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What You Need to Know

  • In both groups, the share of investors who own stocks has dropped significantly.
  • One-quarter of Black participants own cryptocurrency, compared with only 15% of white respondents.
  • Nearly half of Black and white investors surveyed reported investing in something they did not fully understand.

The investment gap between Black and white Americans has narrowed, according to the 2022 Ariel-Schwab Black Investor Survey.

This finding, however, comes against a backdrop of investor participation at historic lows for both racial groups. In 2022, just 58% of Black Americans and 63% of white Americans own stocks, compared with survey peaks: 74% of Black investors in 2002 and 86% of white investors in 2015. 

Stock market participation is higher among younger Black Americans, with 68% of Black respondents under 40 now investing, compared with 57% of younger white investors. 

Helical Research conducted the new survey online in January among 2,057 adults in the U.S. with $50,000 or more household income in 2021. The average annual household income of Black survey participants was $99,000, and for white participants $106,000.

Riskier Steps

The study found new, higher-risk investment options popular, especially among younger and first-time Black investors. 

One-quarter of Black Americans surveyed own cryptocurrency, jumping to 38% among Black investors under 40. By comparison, only 15% of white investors and 29% of those under 40 own cryptocurrency. 

Black investors were more than twice as likely to say cryptocurrency was their first investment. They were also twice as likely to rank cryptocurrency as the best investment choice overall.

Clear evidence exists of an education gap between Black and white Americans, according to the survey. Despite the headlines about volatility in cryptocurrency values, platform hacks and a lack of government regulation, Black investors are less likely than white investors to think that cryptocurrency is a risky investment. 

Indeed, 33% of Black investors said investments in cryptocurrency are safe, compared with 18% of white investors who said this, and 30% believed they are regulated by the government, versus 14%. 

The survey found these notions among 51% of Black investors under 40, compared with 41% of their white counterparts.

More Education Needed 

Nearly half of all Black and white investors in the survey reported that they had invested in something they did not fully understand, a behavior even more pronounced among investors under 40. 

Although both racial groups are entering the market without the information they need, Black investors are more likely to trust and make investment decisions based on less credible information sources, such as social media, according to the study. 

One-third of Black investors said they had invested based on something they saw on social media, compared with 20% of white investors. This gap surged to 51% of Black and 36% of white investors under 40. 

“The confluence of low stock market participation, 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,” Mellody Hobson, co-chief executive and president of Ariel Investments, said in a statement. 

“Many new and younger investors have never experienced market volatility like we’ve seen in the last couple years, and we have a responsibility to educate these new investors about the value of long-term investing to build wealth and achieve financial security.” 

Asked the size of investment returns they expected, 27% of Black investors cited outsized annualized returns of 20% or higher, and 19% thought they could “get rich quick” through investing. This compared with only 12% of white investors who anticipate returns of 20% or higher, and 7% who cited immediate profits as a reason to invest. 

Thirty-four percent of Black investors under 40 and 15% among white investors of the same age said they expected returns of more than 20%. 

Barriers to Investing 

Black Americans are less trusting of the stock market and financial institutions than white Americans, and this has led to many Black investors to pull out of the market. 

The study found that since 2020, Black Americans either stopped investing or have never invested. Their reasons: 36% cited lack of trust in the stock market, versus 29% of white investors; 25% said they don’t trust financial institutions, versus 19; and 15% said they had had a bad investing experience, versus 9%. 

Moreover, 56% of Black investors expressed fear of losing money, compared with 46% of white investors. At the same time, 48% of Black investors saw the stock market as offering a fair opportunity for all to profit, up from 40% with this perception in 2020. The Ariel-Schwab survey said this finding signals optimism for the future. 

Feelings of respect have also improved, even though trust remains low. As in 2020, Black Americans were less likely than white Americans to feel respected by financial institutions, but that gap has decreased substantially. 

Forty-four percent of Black Americans said they feel more respected in 2022, up from 35% two years ago, while 51% of white investors said they feel respected, down from 62% in 2020. 

In terms of growing and protecting their assets, Black Americans are less trusting of people and more trusting of technology than white Americans. Trust in technology among Black Americans is highest among men, new investors and investors under 40. 

Investing Trends

Over the last several decades, the Black Investor Survey has shown that 401(k) plans have been the entry point to investing for many Black Americans. But even as the defined contribution plan participation gap between Black and white investors has nearly closed, participation rates have stagnated and are well below 2015 numbers, according to the most recent findings. 

In addition, investors are entering the stock market through a wider variety of investment vehicles. In 2020, 63% of Black investors reported first investing through a retirement plan. This year, respondents were given an expanded list of entry point options, and only 31% of Black Americans reported first investing through a workplace plan. 

Black Americans are saving and investing more in 2022, with contributions up by 40% to $657 per month on average from $393 in 2020. The increase is driven by new investors, high earners and respondents under 40. 

Despite these strides, white Americans are saving and investing significantly more — $857 per month. 

Historically, the survey has shown that Black Americans are less likely than white Americans to have discussed the stock market while growing up. Over the past two years during the pandemic, however, the gap has closed as Black and white investors are almost equally as likely to discuss the stock market with their families. 

Today, 41% of Black investors said they have dinner table conversations about investing, up from 37% in 2020, while 43% of white investors reported the same thing, up from 36%.


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