Written by Bria Overs | Word in Black
(WIB) – The average new investor looks different than in years past. They are younger, more engaged, ready to learn, and black.
A new report from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation's National Financial Capability Survey finds that “a new generation of young investors is entering the market with significantly different investment behaviors and attitudes than older generations.” There was found. This study delves into the specific experiences of investors of color in the United States.
Black investors with non-retirement investment accounts increased by 9 percentage points (45%) from 2015 to 2021. And more than half of them are under the age of 35, meaning Gen Z and Millennials are driving change. Just over a quarter are between the ages of 35 and 54, and just under a quarter are over 55.
Rita McLaughlin, Director of Investor Education and Community Outreach at FINRA, says seven factors drive capital and stock market participation: education, awareness, accessibility, incentives, consumer protection, reduced barriers to entry, and innovation. It states that.
“Based on the data we currently have, I think if the pattern holds, we would expect to see more and more people of color and more Black investors joining the market.” FINRA Investments says the Home Education Foundation. “Past research has shown that once you're in the market, you're less likely to leave.”
Black people participate for the long term, regardless of the ups and downs, odds or unpredictability, because their reason for participating is to make money in the short and long term.
modern black investor
An increase in investors is a good sign and shows a willingness to take risks to increase wealth. However, black investors still have lower balances in their investment accounts than white and Asian investors.
Nearly 60% have less than $50,000 in non-retirement investment accounts, and one-third of those have less than $5,000, according to the report. And it's no surprise since almost half of those surveyed said they started investing within two years. About 58% of white investors have been in the market for more than 10 years.
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New investors are also more likely to take on meme stocks and cryptocurrencies, which are riskier investments. 44% have invested in cryptocurrencies, and more than half are considering cryptocurrencies. Research shows Black investors own AMC or GameStop stock, both of which are popular on Reddit's WallStreetBets forum and were at the center of the 2021 GameStop short squeeze.
However, Valdez told Word in Black that many people are only willing to take average risk, which doesn't match the volatility of meme stocks and cryptocurrencies.
maintain momentum
Black focus group respondents cited different socio-economic backgrounds, lack of education, and experiences of discrimination and racism from financial institutions as reasons for not participating in the past.
McLaughlin says increased investment appetite means products that match it are essential. Technology has certainly helped, with companies like Robinhood and Betterment removing barriers to entry. In fact, reports say that 65% of black investors rely on recommendations from mobile trading apps.
According to the report, they also use YouTube, Instagram, Facebook and Twitter more than other social media sites for information about investments and trusted sources they consider relevant and transparent. , is said to be paying attention to TikTok.
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“We've seen, including in focus groups, that people are very interested in user-friendly interfaces and information,” Valdez says.
McLaughlin says the future is full of “possibility” for Black investors because they start investing at a young age and have access to information.
“One of the big takeaways from this report is recognizing that the trajectories of young people and communities can change,” she says. “Yes, there is much more that can and should be done, but progress is being made to make the market work for everyone who wants to participate.”
