Young Black Americans Buying Stocks More Rapidly, Sometimes Outinvesting Peers

Young Black Americans are intriguingly buying stocks more briskly than in previous years.

The Wall Street Journal reported that, based on the latest Federal Reserve data, almost 40% of Black Americans owned stocks in 2022 versus less than a third in 2016. This activity came before stocks hit near-record highs last year.

Further, other reports show Wall Street engagement for young Black Americans is rising.

This survey done by Ariel Investments and Charles Schwab in 2022 showed 68% of Blacks under age 40 quizzed reported investing in stocks, compared with 57% of younger white investors. Ariel Investments is No. 1 on the Black Enterprise Asset Managers list.

The surge comes as more Blacks select Wall Street to help build their portfolios.

Last November, around 39% of Black families disclosed stock ownership in 2022, as opposed to nearly 34% in 2019, per BLACK ENTERPRISE. The report disclosed that was the largest gain since 2007.

The advancement of Blacks investing in stocks appears to be shifting from previous years. Multiple reports indicate they have traditionally put money into stocks at a much slower rate than other racial groups. Blacks still lag behind their non-diverse peers in median household income amid the stock market uptick.

However, many factors are reportedly igniting the most recent run of younger Blacks as stock investors. They include gaining data from social media, taking part in 401( k) plans, and not being charged fees to buy or sell stock.

In this fresh report, investors of color, including Black Americans, are entering the market at a faster pace than white Investors, and they are apt to be much younger.

The analysis stated those investors displayed many behaviors previously researched and exhibited by younger investors. Those actions included a reliance on social media for investment data and trading risky investments like cryptocurrencies and meme stocks.

Meme stocks have been described as shares of companies traded by communities online. Observers suggest approaching them cautiously because those stocks have been cited as volatile and perilous.

FINRA Foundation President Gerri Walsh stated, “With a large number of young investors entering the markets, financial education leaders will need to adapt, including providing relatable and trustworthy resources on channels these new investors use. While conducting this research, we learned from investors of color about barriers they or their families faced previously in building wealth through investing.”

Simultaneously, the Ariel-Schwab survey also emphasized more education is needed for Black and white investors who disclosed “investing in something they did not fully understand.”

For instance, Black investors are more inclined to trust and make investment decisions based on less credible information sources, like social media. More specifically, some 33% of Blacks report they have invested based on something they saw on social media, compared with 20% of white investors. Check here for more details.