When you think about the epicenter of finance, wealth, power, investment, and success in America, one place comes to mind: Wall Street and the New York Stock Exchange. Unfortunately, most of Black America is unschooled and disconnected from the benefits of Wall Street and the stock market in particular. According to the Federal Reserve Board’s latest survey conducted in 2019, only 34% of African Americans own stocks or equity investments compared to 61% of Whites. Before COVID-19, the average Black American stock market equity investment was valued at $14,000.00 compared to $50,600.00 for Whites. However, last year the Standard & Poor Index gained 26.9%, the Dow Jones Industrial Average gained 18.7%, and the Nasdaq Composite gained 21.4%. The wealth gap has expanded during the pandemic.
But why do African Americans not invest in the stock market? We do not have time to explore all the possible answers in this article, but let me share two historical experiences African Americans have with the stock market. A few blocks away from where the current stock market is located, children and women were sold as slaves.
The second historical experience people of color have with the stock exchange, and Wall Street is this: In 2005, one of the biggest banks in the country, JP Morgan Chase, confessed that two of their subsidiaries; Canal Bank and Citizen’s Bank, accepted and exchanged slaves as collateral for bank loans. To be clear, it worked this way. If a plantation owner defaulted on payment, the banks took ownership of the slaves. JP Morgan Chase was not alone, as Wells Fargo, Citibank, and Bank of America benefited from the slave trade. But leaving aside the history for a moment, why do African Americans still not participate in the stock market and build wealth? Let’s look.
This is complicated, but some studies have shown that financial socialization impacts how people behave. Peoples’ financial knowledge, personality, and norms are developed through socialization. This factor highlights various challenges facing the black community. If growing up, African Americans are not exposed to or are engaged with individuals, communities, opportunities of different financial ecosystems, the likelihood of investing in the stock market is significantly diminished. The primary agents responsible for financial socialization are parents, especially mothers in African American communities. But I am not leaving this burden of financial socialization up to mothers, nor should it be a cross for African American women to carry alone. If you did not grow up with or among money if your friends are not informed or interested in investing and the stock market, chances neither you nor your children will take steps to build wealth and become financially secure or independent. My suggestion to you is to create an investment culture within your community! Black History Month is another opportunity to address investments and the stock market.
There are at least three factors worthy of consideration when considering the relationship between African Americans and stock market investing when it comes to risk. The factors are, I do not understand how the stock market works; I do not make enough money to invest in the stock market, and I can’t afford to lose money investing in the stock market. Which one are you? De-bunking each one of these is probably the subject of another Money Monday. As for now, I will share that I was not born with Wall Street Stock Market knowledge but had to put in the work and seek advice to become knowledgeable. Your risk tolerance will not grow or change by binge-watching Netflix! You’ll keep doing the same thing and not take advantage of wealth growth opportunities in the market. It’s time to make a change. Let’s talk Money Monday on the Zoom Conversation on February 28, 2022, at 7:00 p.m. Sign up at: https://bit.ly/TTCM_Feb2022.
Today’s what’s up is about Crypto. On February 17, 2022, perhaps while you were not paying attention, the Department of Justice announced their first Director of the National Cryptocurrency Enforcement Team (NCET). Why is this important? It’s important because it means that Crypto has become mainstream, and your favorite uncle, Sam, is now directing resources and attention to those activities in a serious way. This team will be focusing on illegal activities, currency exchanges, and a host of other areas, including my favorite, related crypto tax issues. Stay tuned. And that’s what’s up! Let’s talk Money Monday fundamentals on the Zoom Conversation on February 28, 2022, at 7:00 p.m. Sign up at https://bit.ly/TTCM_Feb2022.
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.