STOCKS SOAR, BUT MOST BLACK PEOPLE MISSING OUT
NEW YORK — Americans who own stocks are pulling further away from those who don’t, as Wall Street roars back to record heights while much of the economy struggles. And Black households are much more likely to be in that not- asfortunate group that isn’t in the stock market.
Only 33.5 percent of Black households owned stocks in 2019, according to data released recently by the Federal Reserve. Among white households, the ownership rate is nearly 61 percent. Hispanic and other minority households also are less likely than white families to own stock.
Many reasons are behind the split. Experts say chief among them is a longstanding preference by many Black investors for safer places to put their money — the legacy, some say, of decades of discrimination and fear. Also, many were never taught what they were missing out on.
“We didn’t have a grandfather or aunt or uncle or mom and dad educating us on the markets because they didn’t benefit from it because of historical discrimination in this country,” said John Rogers, founder and co- CEO of Ariel Investments.
Black people have also often lacked the opportunity to build up wealth, park it in the market and watch it grow over time. In general, they have lower incomes, which leaves less money to invest after paying bills. Many also work jobs that don’t offer retirement plans like a 401( k).
But researchers say that even wealthier Black households are much less likely to own stocks than their white counterparts. That means they missed out on the roughly 260 percent returns for S& P 500 funds over the last decade and the resulting chance to see their wealth grow.
The typical Black family has less than $ 13 in wealth for every $ 100 held by the typical white family. Lower rates of stock ownership are a small reason why. The most important factor may be the restricted access Black borrowers had to mortgages and affordable housing through decades of redlining and other discriminatory practices, said Raphael Bostic, president of the Federal Reserve Bank of Atlanta, in a recent speech.
Researchers say increased investment by racial minorities in the stock market, carried through future generations, could help narrow the wealth gap. Toward that end, industry groups are trying to encourage more Black people to become financial planners, who could then draw in potential investors.
The differences in stock ownership between white and Black households go back decades, and they narrowed a bit between 2016 and 2019, the most recent data available from the Federal Reserve. But researchers say the coronavirus pandemic and resulting recession probably widened the gap again.
Instead of stocks, wealthier Black households are more likely to own assets that have a reputation for being safer, such as bonds, life insurance or real estate, said Tatjana Meschede, associate director at Brandeis University’s Institute on Assets and Social Policy.
Black people “are shortchanging themselves by investing in more secure opportunities that yield less of a return,” she said.
The largest bond fund has returned less than 40 percent over the last decade, for example. That’s far below the nearly 257 percent that the largest stock fund has delivered over the same time. Real estate has also had slower gains.