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Where Are the Black Investors?: Black Americans’ Lack of Participation In Stock Market Increases Racial Wealth Gap

Historically, Black Americans tend not to invest in the stock market – and it’s costing them wealth.

Blacks missed out on the historical stock market rebound from pandemic lows when affluent 401(k)-holders and savvy investors in the U.S. enjoyed double-digit returns from stocks over the past two years, according to a recent CNBC report.

Photo by Anna Nekrashevich from Pexels

“We know that the housing market is discriminatory. We know about the history of redlining. We also know from a recent study that Black-owned homes are devalued at $48,000 per home. But when you’re talking about Wall Street … we are all privy to the same products and profits,” explained financial educator Kevin Matthews on Finurah’s new “Money Talk” Instagram series. Matthews has created the financial education platform Building Bread. A former financial adviser, he is the author of “Starting Point: How to Build Wealth That Lasts.”

Only 34 percent of Black American households owned equity investments as compared with 61 percent of white families, according to a 2019 Federal Reserve Board survey in 2019. The survey found that this is nearly a quarter of what their white peers held. The average value of stocks Black Americans owned amounted only to $14,400.

“Because Black households are less likely to be invested in the stock market and on every level less likely to be engaged in the financial system, they not only entered the pandemic with large gaps, the likelihood is that we are going to see some of these gaps widen coming out of the pandemic,” John Lettieri, the Economic Innovation Group’s president, and CEO told CNBC.

Retirement plans

“If you had access to a well-managed retirement plan, what’s happened in the last two years has been a boon to your bottom-line wealth,” Lettieri told CNBC.

But only 44 percent of Black Americans have retirement savings accounts, with a typical balance of around $20,000. Compare this to 65 percent of white Americans with retirement accounts, who have an average balance of $50,000, according to the Federal Reserve. 

Black Americans tend to hold less-risky assets such as bonds, which have lower returns. A Credit Suisse study found that even among the top 5 percent of Black wealth holders, they are more likely to own conservative investments like real estate, bonds, and life insurance than their white counterparts.

Read “Ready to Play the Market? How to Pick Stocks as a New Investor” here.

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