By John Burton Jr.
The world of American finance is experiencing a significant transformation — it’s becoming darker. It’s not the economy or a recession but more Black individuals are participating in the stock market. This new interest is boosted by more Black and brown people who are seeking more creative ways to build wealth and secure their financial futures.
According to a 2024 report by the FINRA Investor Education Foundation study, “Investors of Color in the United States.” Black investor participation is increasing. This incline has been fueled by a few factors: a rise in financial literacy, rapid technological advancements and a shared desire for economic empowerment. It’s this unique shift that reflects resilience and ambition, paving the way for a more inclusive financial landscape.
Throughout history, Blacks people have encountered significant obstacles in trying to build wealth, shaped by discriminatory lending practices, a lack of financial education and pervasive economic inequality. It’s these challenges that aided in causing a wealth divide between Blacks and whites. Today, there is a new generation of Black investors seeking to dismantle these longstanding disparities head-on.
“It’s all a matter of access to information,” said Roderick Barnes, PhD, private wealth advisor. “More Blacks are becoming exposed to financial information, largely through peers and friends, which means they’re more willing to consider investing.:. Through initiatives like workshops, educational programs and a wealth of online resources, Blacks are learning more about essential fundamentals like stocks, bonds and mutual funds to confidently step into the stock market, Barnes continued.
Younger people are starting to see the benefits of investing. Survey results show that investors of color are entering the market at a faster pace than white investors, according to the FINRA Investor Education Foundation report. “In addition, investors of color, particularly Black/African American and Hispanic/Latino investors, tend to be much younger than white investors, and thus exhibit many of the same behaviors typical of younger investors, such as reliance on social media for investment information and trading risky investments like cryptocurrencies and so-called meme stocks” the report stated.
Non-white investors tend to be younger than white investors, the report shows. Nearly half of investors of color, particularly Black and Latino investors, are under 35 years old.
“Younger investors are willing to take more risks,” Barnes said. “At their age, they can afford to lose, but they still have time to recover from a loss. According to a study conducted in 2022 and now released by Ariel Investments and Charles Schwab, 68% of Black respondents under 40 are investing in stocks compared to to 57% of younger white respondents.
Now, more than ever, Blacks are stepping into the world of investing, which could be attributed largely to technology and social media. With just a few taps on smartphones, mobile trading apps and online brokerage platforms have made it easier than ever to buy and sell stocks and invest.
Moreover, the use of social media has become a game-changer. Platforms like Facebook, TikTok, Instagram and YouTube are abuzz with influencers and more Black finance gurus sharing savvy investment tips, clever strategies and inspiring success stories. burgeoning “If they can, I can” mentality that’s motivating more Blacks to delve into investing and start building their wealth.
As a result, a dynamic wave of financial empowerment has been sweeping through Black communities with conversations about creating generational wealth becoming more important, said Barnes. “Investing is really about moving forward. If you’re not investing, you’re moving backward.
According to “The HBCU Advocate,” this shift is also connected to the emergence of Black-owned businesses and entrepreneurial experiences. Inspired by this surge in the Black entrepreneurial space, many Black investors are eager to support these initiatives by putting their money into the stocks of companies they believe in, according to the publication. This movement represents not just investment, but a powerful statement of solidarity and community growth.
Although the landscape of investing is evolving, several hurdles still exist. According to a 2023 series “Retiring While Black” by AARP, many Black investors still are skeptical and mistrust financial advisors and institutions.
Moreover, the daunting prospect of losing money often holds back potential investors from taking the plunge. To combat this, Black investors and financial professionals need to form trusting relationships. By offering tailored advice and genuine support, financial advisors can educate and empower Black investors on the complexities of the financial world and realize their long-term financial goals.
Financial literacy, technology, personal empowerment, and a younger but financially educated demographic are bringing about this uptick in Black investors. This yellow brick road to wealth featuring Black investment is not just about financial growth but learning the fundamentals of building and transference of generational wealth.
“Investing is a long-term process and not for short-term money,” Barnes said. Staying the course is imperative. In doing so, Black investors can shape a brighter financial future for themselves, their families and their communities.