A report funded by Charles Schwab and Ariel Mutual Funds, which was based on a pool of 500 black Americans and 500 white Americans, found that black Americans were 35% less likely to own stocks than whites. To make sure the research was fair, each individual in the test group earned over $50,000 a year. The report itself was carried out by Neuwirth Research. This racial disparity in stock ownership means that black Americans do not pass on wealth to their children as much as white Americans do. This news is very disheartening since black Americans have a consumer spending power that is valued at $1 trillion dollars. The good news of the study is that blacks who earned $100,000 or more were just as likely to own stocks as whites. Therefore, the disparity is within the middle-class income level of black America.
One of the reasons for the racial disparity in stock ownership could be that black Americans, on average, view the stock market as being either too risky or too complicated. This could be related to the historical differences in jobs that black Americans and white Americans historically held. For example, white Americans are more likely to have an ancestor who worked in banking or even on the stock market itself vs. black Americans. In fact, at one time Wall Street itself was actually a slave market. This slave market, located on Pearl Street and Wall Street, is symbolic in the sense that black Americans historically were not on the same starting point as many white Americans.
Slavery ended in America in 1865, and many newly free blacks naturally went into fields that they were used to, which was sharecropping. Sharecropping became the norm down South and eventually, many black people migrated up North to work in factories. The blue collar tradition of work was the backbone of black survival. At best, black Americans were urged to increase their vocational skills by famous black leaders like Booker T. Washington. On the flip side of Booker T. Washington were men like W.E.B. DuBois, who was at odds with Washington over the best path for black America, in terms of which professions they should choose. To men like W.E.B. Dubois, gaining an academic or college education (along with fighting for greater civil rights) was seen as the best path forward for black America. Yet, there was no black leader or black cultural movement that really introduced stock ownership into black economic thinking. Even today, many debates in the black community (when it comes to career choices) are centered around vocational skills vs. "fancy higher education degrees"- but investment culture has little voice in those conversations.
Luckily for black America, the age of information is upon us. While there is no Booker T. Washington of stocks or a W.E.B. Dubois of Wall Street, we have social media. With social media, we can spread the word throughout the black community that investing is OK to do. What needs to be done is the creation of a new black investment culture that deconstructs the myth that stocks are either too complicated or that they are for rich white people. A new black culture of stock ownership must push through the confusion and fear barrier that many middle and lower class black Americans have towards stocks. Stock trading platforms like Etrade and TD Ameritrade must be made known to the black community via social media. It must also be understood that not all stocks cost an arm and leg. There are plenty of great stocks that are below $50.00 that just about any working black American can afford. By spreading the word on Facebook, Twitter, and YouTube, we may be able to close the gap in the racial disparity of black and white stock ownership.