Profiling The Black Investor

Your financial advisorA long-neglected market begs to be tapped

We’ve all seen evidence of African Americans’ collective spending power, if merely from the numerous ad campaigns aimed at our community. But until recently, what remained something of a mystery was just how we save and where we stow our money.

Recent studies are now shedding light on the subject, pointing to how African Americans as a group invest and save and just what they expect to reap. And after sifting through the information gathered, the lesson many of us should walk away with is that we need to examine avenues for diversifying our assets.

A recent survey, commissioned by Chicago-based Ariel Capital Management, the African American investment firm run by John Rogers, released some surprising results. Ariel focused on American households with annual incomes of $30,000 or more.

Working in conjunction with a polling firm, Roper Starch, Ariel found that African Americans are indeed very active in financial planning, with 93% of those polled responding that they had some sort of investment pattern over the last year. That percentage was no different from the slice of all Americans, across racial lines, that engaged in methodical financial planning.

But even though Americans across the nation’s ethnic divisions agree on the importance of active management of their assets, there remains a large difference. Only 27% of African Americans buy stocks and bonds, compared with 38% of nonblacks. African Americans were also less likely to invest in several other important wealth-building instruments. The percentage of blacks investing in mutual funds was 22%, vs. 35% of non- African Americans; 13% of African Americans invested in money market accounts, vs. 26% of non-African Americans.

The reason might well be linked to African Americans’ frugal ways. Compared with other Americans, blacks are generally more conservative in their investment choices, choosing to spread their investment portfolio across an average of 3.3 investment vehicles, as opposed to the 4.1 median for other groups. That pattern has surfaced in other studies as well, as documented in Black Wealth/ White Wealth by Melvin L. Oliver, a professor at UCLA, and Thomas M. Shapiro of Northeastern University. Citing statistics gathered in 1988, the two found that blacks had more of their overall assets sunk into their homes (63%) than whites (43%), and less in stocks, bonds and other financial stores of wealth.

That’s not to say African Americans are willing to settle for less. Although their investments are less diversified, they expect a larger payoff, with expectations focused on an annual return of 14.6% vs. 11.2% for non African American investors. African Americans also differ from the country’s other ethnic groups in that they are much more concerned about an investment firm’s managerial diversity. Race, religion and gender variety in the boardroom were found to carry more weight with blacks than other ethnic groups. The community activities of investment firms were also found to be more important to African American consumers.

Still, the black community shows a fairly uniform idea of the most important factors in selecting company. A solid reputation (84%), a strong performance record

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