The demographics of investing are shifting away from its traditional base (middle aged, male and white) as a growing number of African Americans are joining the investing community. The Black Investor Survey by Ariel Investments was conducted between June 12 and July 19 of 2015 and revealed some surprising numbers that may reflect a larger trend in investing among the black communities.
Read on for insights from the study that may help financial advisors reach out to this demographic. (For related reading, see: How Financial Advisors Can Capture the $240B Worth of Fees Coming by 2030.)
A Bullish Outlook
The Black Investor Survey that was taken last year also polled 500 Caucasian investors at the same time. The survey showed that a significantly higher percentage of blacks had an optimistic view of the markets compared to their white counterparts. In fact, half as many of them were bullish on the American economy vs. whites, with 75% believing that the economy will get better from here. Only half of the whites that were polled felt that way.
Two-thirds of African Americans polled felt that the economy has completely recovered from the recession as opposed to two-fifths of Caucasian responders. Melody Hobson, CEO of Ariel Investments, said in a statement that the results of this poll represent a substantial shift in the attitude of the markets by the African-American community. “This is such a big change from what we've seen in past years," she said. "African-Americans were disproportionately affected by the recession in terms of layoffs, and the survey suggests that people are getting back to work.”
Ms. Hobson also agrees with the bullish sentiment despite growing global political and economic concerns. “Although China is the second-biggest world economy, it composes roughly only 13% of the global economy," she said. "So even if it somehow suffered a horrific -10% fall in overall production, the global economy would likely only change by about -1%.” (For related reading, see: Minorities and Investing: What Financial Advisors Need to Know.)
The results of this survey clearly show that black attitudes towards the stock market are changing. A Black Investor Survey poll in 2013 revealed black households were still only saving and investing half as much per month as white consumers. In a 2013 article for Huffington Post Investors, author Tyrone Jackson wrote that the availability of free online research and low-cost trading has left antiquated thinking as the only real obstacle for black investors. Since a good portion of them come from a lower-class or poverty level background, it may be harder for them to be willing to risk their money in the stock market, which they may still perceive as a white man’s game.
The 2015 survey also showed that 20% more whites were invested in the stock market compared to African-Americans, which represents a 7% increase for both groups since 2010. The survey also showed that participation in the stock market among blacks is directly correlated to their income levels. A little over half of those with incomes between $50,000 and $100,000 invested in the markets while four out of five of those with six-figure incomes did so. This difference was much less stark for white investors.
Younger African-Americans also show higher incidence of market investing than older workers and retirees. Other key numbers in the survey include 45% of African Americans list saving for retirement as a top priority, which is a major improvement from the 33% who said this in the 2000 survey. However, black respondents also expect to work until a later age.
The Bottom Line
Although the African American community still clearly lags other demographics when it comes to investing in the stock market and for saving for retirement, recent surveys show that these trends are changing. Automatic enrollment in company retirement plans may be one of the reasons for this shift, but a growing percentage of black households with incomes of at least $50,000 are now looking to equities and real estate as a primary means of getting ahead. (For related reading, see: Top 10 African American-Owned Businesses.)