More Black Americans became first time investors in 2020 than any other year, and it’s mostly being driven by the under 40 crowd, according to a new survey.
The latest Ariel Investments-Schwab Black Investor Survey finds there were 15% new Black investors last year compared with only 4% new white investors.
Carrie Schwab-Pomerantz told Yahoo Finance Live that the interest in the stock market among younger Blacks may help to close the wealth gap. Now, there's an almost equal number of younger Black investors against their white counterparts under 40 years old, according to Schwab-Pomerantz.
“Black Americans are talking more today about all aspects of money — debt, paying for college, and the stock market. And that's the beginning of financial security because it demystifies some of the language around money,” she said.
Blacks lag whites in building wealth
While younger Blacks have increased their engagement with the stock market, the survey finds overall, Blacks are still far behind their white counterparts when it comes to building wealth. The survey finds only 55% of Black Americans own stocks compared with 71% of white Americans.
She said over time, the compounding effect of this investing gap could hurt Blacks’ retirement savings and their ability to pass on wealth to the next generation. When it comes to participating in a retirement plan, Blacks and whites are fairly comparable (53% vs. 55%), but the survey reveals whites contribute more per month. Black Americans invest $231 on average, compared with $291 for their white counterparts.
And more than twice as many Black investors, 12% compared with 5% of white investors, said the COVID-19 pandemic led them to borrow against their retirement plans.
In another discouraging sign, just 35% of Black investors feel they are treated with respect when dealing with a financial advisor. Schwab-Pomerantz said that’s something the industry must address to ensure that all people have equal access to the resources in order to invest.
“Our study also showed that Black investors want to work with a firm that has some level of racial diversity,” she said. “We just want to make sure that everybody has the tools and the knowledge to be lifelong investors.”
The Ariel-Schwab Black Investor Online Survey polled 2,104 participants with 1,007 identifying as Black and 1,097 identifying as white. All respondents were age 18 and older with $50,000 or more in household income in 2019.
Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.