On the eve of Black History Month, the Financial Education Foundation, an extension of the watchdog Financial Industry Regulatory Authority (FINRA), A report has been published We analyze the demographics, habits, and assumptions of not only white investors, but also investors of color, including Black, Hispanic/Latinx, and Asian American/Pacific Islanders. If you look at the numbers for black investors, the top notes are: They are younger, less experienced in the market, and arrive at financial decisions differently than older white investors.
“Many participants reported that investing is not common in their communities. “They did not invest because of their socio-economic status (lack of funds), which contributed to their lack of funding (e.g. having little to no financial system), or both,” the report said. “Thus, they had to either teach themselves how to invest or seek help from colleagues (often white) with more investment knowledge and experience.”
serious play money
An important caveat is that the investors in question are the people who put their money to work outside This is how most people interact with the stock market. Because FINRA is a private organization funded by the financial industry, the foundation's goal is to make people feel comfortable by providing funds to keep the lights on on Wall Street. That's it.they don't want to improve the situation The gap between rich and poor between blacks and whites through Taxes and other types of wealth redistributionthey just want black people to invest themselves in their bootstraps.
To that end, the Education part of the Financial Education Foundation works both ways. Those outside the industry can learn best practices on how to invest, and those within the industry can learn how to respond to them. One of the most important numbers is the amount of money black investors stake compared to white investors. America's white investor population is skewed toward the upper echelons, with nearly one-third of his (non-retired) holdings exceeding $250,000. On the other hand, most black investors operate with less than $50,000 in their funds.
Part of this difference can be explained by age, as half of white investors are over 55 and half of black investors are under 34. But given that the Federal Reserve's Consumer Finance Survey shows that white households tend to have assets around $1 million; 6 times the amount When you look at black household wealth as a whole, this number didn't come out of nowhere.
late start
The imbalance in holdings helps explain another aspect of this report. 95% of black investors and white investors put their money into the market to make money in the long term, while 91% of black investors put their money into the market to make money in the short term. I'm about to sleep. Well, only 69% of investors are white.According to the report, that speed bias manifests itself in a variety of ways, including an increased tolerance for risky bets and increased support for volatile asset classes such as: cryptocurrency and meme stocks.
Black women who participated in the report's focus groups framed their investment efforts partly in terms of making up for lost ground. “My male colleagues taught me about investing, many of them white, and they were the ones who taught us how to invest, just like women and black women,” she says. said. “They've been doing this for years since they were teenagers and are now entering adulthood. We've only started investing in the last five years.”
The time gap between starting to invest, or at least being in a financial position to invest, is one of the main advantages of so-called “baby bonds”. Proposed by economist William Darity. Under the plan, every American child would receive a $25,000 mutual fund at birth that would be paid out as an adult, with larger payments going to low-income families. New Jersey Sen. Cory Booker and Massachusetts Rep. Ayanna Pressley like the idea so much that they're sponsoring legislation based on it. More than once.
It's come a long way
In an article published in the Journal of Economic Perspectives last fall,Changes in the distribution of wealth between blacks and whites since the American Civil War” states that the racial wealth gap existed not only because enslaved black people were denied full citizenship rights and therefore could not build wealth, but because they were literally wealth itself. It reminds me that.
“Despite significant obstacles to black wealth accumulation, we now know that the wealth gap between black and white Americans narrowed in the century after emancipation,” the authors write. writes, and also details these obstacles.
In the post-slavery era, black Americans faced discrimination in the labor and housing markets, exclusion from financial markets, and the complete destruction of black wealth, which prevented the continued convergence of their wealth. In addition to this, the increased importance of capital gains since the 1980s has completely reversed the process of racial wealth convergence, with today's average wealth disparity being much higher than it was in the 1960s and 1970s. It has become bigger than the end of the Gon era.
(Don't tell FINRA about that capital gain line.)
