Report finds that Black people are the biggest new group of stock investors
With the help of social media, mobile apps, and open discussions about finance, the stock market has diversified.
Over the past few years, terms like personal finance and financial literacy have become buzzwords on social media. In addition to generating likes and views, these topics have made an impact beyond the virtual sphere. Recently, studies found that Black investors, especially young Black Americans, are the fastest-growing group of stock buyers.
The Wall Street Journal reported that in 2022, almost 40% of Black Americans owned stock, up from about a third in 2016, per Federal Reserve data. Similarly, a survey by Ariel Investments and Charles Schwab revealed that the growth is led by young investors under 40. Approximately 70% of the survey’s Black participants under 40 were investing, compared to 60% of their white counterparts in that same age group.
“You’re seeing topics of money and investing coming up at the dinner table slightly more among Black families than they had ever before,” Arielle Patrick, Ariel Investments’ chief communications officer, said, per WSJ.
Also fueled by mobile apps, commission-free trading, participation in 401(k)s, crypto, meme stocks, and social media, experts noted young Black investors’ increased access to financial tools and information.
Despite the notable amount of Black stock buyers, the Federal Reserve’s 2022 Survey of Consumer Finances data suggests that the amount of money put into stocks is still small. As previously reported by theGrio, the median wealth for Black families increased by 60% between 2019 and 2022. Yet Black families’ median wealth is still $240,100 less than the median wealth of white families.
Though Black people may not be putting as much money into their stocks, the group’s desire to buy stocks and make good investments continues growing thanks to social media, according to the Finra Investor Education Foundation.
When looking to learn more about stocks and financial investments, the study found that three-quarters of Black people turn to family, friends, and colleagues. However, the majority tend to lean on social-media groups or message boards for investment knowledge. Meanwhile, most white investors rely on family and friends for investment information.
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Although social media has made investment information more digestible and accessible, investment influencers tend to promote riskier investment suggestions like meme stocks than financial advisers who typically recommend more traditional index funds for beginners, the WSJ reported.
Some investors, like sales representative Calah Beale, have lost money following social media’s suggestions, the WSJ reported. Meanwhile, others like college student Noah Reese told WSJ that they used a mix of trusted sources like Benjamin Graham’s “The Intelligent Investor” and YouTube videos by investment influencers.
“At the time, I thought I was making a good financial decision,” Beale told the WSJ, explaining how she lost $10,000 in savings when her meme stock investment dropped.
Ultimately, before making any investment decisions, remember to look at a variety of sources and experts.
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