Make Money, Money: Are Black Millennials Closing The Investment Gap?
African Americans have never been known as major investors. In fact, according to a 2015 Prudential Financial study, African Americans are mainly savers. Of those surveyed, 51 percent described themselves as savers and only 9 percent said they were investors, but Black millennials are slowly turning this study and others like it on their heads.
A new study by Ariel Investments found that 67 percent of Blacks “under age 40 who earn at least $50,000 annually are invested in stocks either directly or through mutual funds. While their white cohorts’ investment rate is higher, at 73 percent, that difference of 7 percentage points is the smallest of all the age brackets in the study,” reported CNBC. This would seem that Black millennials are investing their money. And their may be a reason why. “Access to information and exposure to various investments/accumulation tools that were not readily made available to African Americans,” explained financial advisor Eszylfie Taylor, founder/president of Taylor Insurance and Financial Services. “Simple concepts like tax deferred, compounding interest were not taught to generations in the past.
But Black millennials know those concepts now, and as a result are actually closing the gap. In fact, while stats show that Blacks’ participation in the stock market has increased overall, it is the Black millennial who is being the more aggressive investor. But Digi-cultural trend analyst Lauren deLisa Coleman, author of America’s Most Wanted: The Millennial: How to Quad Decode and Trend Forecast, who specializes in the convergence of popular culture, millennials, and trends, questions the Prudential survey. “I’m not sure about this–First millennials are not investing in the stock market (due to lack of trust), now all the Black ones are?” she questioned. “While some Blacks are rising, some are falling dangerously behind. The massive and growing wealth gap in our country is definitely impacting this sub-demo (Black millennials) too! So I’d say that this ‘study’ is not quite deep enough.
“That having been said, if they are ‘narrowing the gap’ it’s because those on the positive side of the wealth gap are earning more than before, so it makes sense that that could tip the numbers. I’m not clear, though, why the study includes up to 40 when millennials stop at 34 years of age. Thus, it’s skewed.”
But let’s say the study is accurate and Black millennials really are narrowing the racial investment gap, is access really the only reason for the increase? According to investment specialist and Black millennial Joseph Carter, founder of Stonestreet Enterprises, the answer is no. “This starts with the fact that African American millennials are narrowing the gap between their white counterparts in Corporate America, which leads to increased investments in retirement plans. Furthermore, due to cost savings, more and more corporations are moving towards defined contributions plans, where the corporations are only responsible for the contribution and the employees are responsible to manage their own retirement investments in the capital markets. With this shift in corporate America corporations it forces the millennial African Americans to become far more educated in regards to investing.”
Black millennials also seem to be looking more toward the future and focusing on generational wealth building. “It’s not about what you make. The key is what you keep. Your money doesn’t get sick. Your money doesn’t get tired. Your money doesn’t need to go on vacation. It can work and work and work. Rather than working for dollars allow your dollars to work for you,” explained Taylor, who is also a Black millennial.
But you can’t just jump into investing, you need to know where to invest and how. “Invest early and often,” advised Taylor. “No one knows when the market is at its height or low, so a well-balanced , diversified, long-term approach is advisable. Understand your risk tolerance, time horizon, and investment options. The best plans for short-term liquidity and access to cash are typically the worst plans for long-term growth and income. Conversely, the best plans for long-term growth and income are typically the worst plans for short term liquidity and access to cash.”
Be careful where you get your investment advice as well. “Don’t take investing advice off Facebook,” reported financial-services company The Motley Fool. “Facebook pages and forums which discuss investing ideas can be interesting, but take anything you read with a whole bucket full of salt. Discussions are often dominated by people with their own radical investing philosophies and agendas, which often will not match your needs or time horizon.” Instead of browsing social media, seek out investment professionals to help you. If you can’t afford an adviser, reasearch free–but reliable–sources. “Read top financial publications such as Forbes, The Street.com, etc. Talk to friends who invest, talk to older successful investors; try some of the new apps that are out here for investing. Consider investing in Black-owned companies, particularly start-ups that seem promising; it’s good for the overall ‘community’ and is sorely needed,” suggested Coleman.
Lifestyle changes can also assist your portfolio development. “Being young, Millennials have lower average incomes than older generations and less cash to spend. But as you start to work and grow your income, do all you can to avoid the trap of lifestyle creep and drive it into savings…Budgeting is an old concept, but simply knowing how much you earn and how much you spend will keep you out of debt and help you save towards investing,” reported The Motley Fool.
Simply put, you need to pay off your debts–including your student debt; stop borrowing and invest your money instead; and make a plan and invest your way. “Follow your own path. Write down your own investment goals and follow your own path. There is no single ‘right answer’ in investing. And because it takes two people to make a trade, there will always be someone with the opposite opinion to yours,” The Motley Fool noted.
One opinion that holds unanimous in this space is that investing is something the Black community needs to wake up to and embrace. “I think Black millennials should and could invest to look at building legacy wealth like their ethnic counterparts,” Coleman said. “This is important since we have so much catching up to do. But it’s important to be realistic, and play for the long-term.
Carter agreed, “Investing in capital markets in America is a primary driver in achieving financial freedom. If the goal is for Black millennials to beef up their financial and social status, an understanding of investing is essential. When Black millennials begin to increase their levels of investing the generations to come will be more dynamic businessmen and astute investors. This development will create a more diverse marketplace as well as a business environment that is far more reflective of African-American communities. Through successfully investing, Black millennials will have the ability to build wealth which can be passed down to their children and grandchildren. No longer will our children inherit the debt that our parents and grandparents left to us, instead we will bequeath our children a slice of that good ol’ American Pie.”