How Black Americans approach crypto investments

Portfolio Manager for Schwab Asset Management Portfolio Manager Kelly Johnson sits down with Yahoo Finance Live to talk about Black investors' sentiments on cryptocurrencies and digital assets, as well as generational investing.

Video transcript

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- Welcome back, everyone. Charles Schwab and Ariel Investments recently published their 2020 Black Investor Survey. Well, let's take a look at the trends they uncovered with Kelly Johnson, Portfolio Manager for Schwab Asset Management, and Yahoo Finance's own Ronda Lee. Thank you both for joining me. So first, I want to talk about the goal of the survey here and what sort of impact you're hoping that it has, Kelly.

KELLY JOHNSON: Yes. We've been doing this survey in partnership with Ariel Investments since 1998. And the idea was to track the behaviors and attitudes towards investing and some of the differences between Black and white investors in the United States over time.

RONDA LEE: I have a question for you. So I'm just curious, particularly when it comes to the amount of crypto investing, not all cryptocurrency is created equal. So I know that you mentioned that most Black investors have a huge crypto portfolio. When you spoke with them about their crypto, was there any distinction made between Bitcoin versus the other type of cryptocurrencies out there?

KELLY JOHNSON: Well, the survey is broader than crypto. It focuses on-- across asset classes and across ways to invest, such as mutual funds, exchange traded funds, et cetera. So when the survey asked about crypto, it was more in the generic sense, not differentiating between various types.

The-- the takeaway, though, for us was that we were extremely pleased to see that, in particular, Black investors under 40 were investing at a level in the stock market higher than white investors. And we were actually excited to see that they were engaged in some of the newer investments, such as crypto and things of that nature. But unfortunately, we found evidence in this survey that there were many investing in crypto and other assets who didn't necessarily understand what they were investing in.

- With that in mind, then, we did see in the survey there's greater trust in technology as a way to grow and protect money by 31% of the Black investors that you surveyed there. What does that mean for some of these volatile investments or, perhaps, in some of these volatile investing environments, like right now?

KELLY JOHNSON: Sure. It's interesting. I'll use a conversation I had over Thanksgiving with my son, who's in his mid-20s, as an example. So we were talking over Thanksgiving dinner about crypto. And I was telling him the way I think about it. And he was telling me the way he thinks about it.

And he came at it from two angles. The first was that, you know, we should not trust the system. We shouldn't trust the Federal Reserve. We shouldn't trust the government. We should be invested in something that-- that is not going to be looking at us in terms of race, but just in terms of our ability to invest.

And then the second one was more generational-- that we're younger, and we know more about this than you, that sort of thing. So we actually got a similar vibe or similar takeaway from the-- from the Schwab Investor Survey more broadly-- that this underlying theme of distrust and this underlying theme of trusting technology because technology tends to be less racially biased. So in a way, that underpins some of the investments that we saw in crypto.

RONDA LEE: I just want to follow up on what you talked about with the racial bias and the trend towards more technology, mainly with the 401(k) not being the main gateway to invest in. And we see that they're coming in, maybe, possibly, because they're gig workers, that they're using robo advisors, again, to also avoid any bias that you would get in-person. So did that come into play?

KELLY JOHNSON: It did. This year, 2022, was the first year we had separated out just asking what was their gateway into investing. And about 30% of the time, 401(k)s and similar plans for Black Americans were the gateway in into investing.

You raised a good point, which is that it really is interesting the way African Americans have gravitated toward tech. And I personally feel very comfortable with technology. And there are lots of situations where I'd rather buy something online versus going into a retail store, you know, for reasons that I'm sure you understand.

- And I want to talk about risk aversion because we did see that the study broke down some of the correlation between historical economic and social events, like recessions, health care reform, the murder of George Floyd, and how that impacted trends for Black investors. Talk about those key findings and how that might, perhaps, give us some insights into how some of these future trends might shape investment and risk.

KELLY JOHNSON: Yeah. One thing we found in particular in the 2020 version of the survey was that we ask about Environmental, Social, and Governance investing, or ESG investing. And we found that there was a wide gap between the level of ESG preference among Black investors versus white investors. So Black investors were more interested in this. Black investors were more interested in having their voice heard and reflect their-- their own biases in terms of politics and such and just wanting to do well with their money, you know, as well as-- as well as doing good.

- All right. We do thank you for joining us. Kelly Johnson there, portfolio manager for Schwab Asset Management, and, of course, Yahoo Finance's own Ronda Lee, thank you both.