When my father, N.A. Sweets, was the publisher of the St. Louis American, he taught his children the importance of investing in the stock market. As a teenager he taught me how to search for stocks of companies that advertised in our Black weekly. We recognized names like Anheuser-Busch, Emerson Electric, Ozark Airlines and others. With my brother and sister, we would visit brokers to learn about purchasing stocks. He compared it to his betting on the horse races at Cahokia Downs. There were risks and rewards. That was way back in the day. Today, information about investing is at our fingertips on easy-to-use apps, allowing modest investments in fractional shares without fees. Studies outlined in this article offer reasons why Black investors may be missing the benefits of long-term investing.

The racial wealth gap remains one of the most significant economic disparities in the country. Black families, despite the progress made in the last decade, still face considerable barriers when it comes to building long-term wealth.

According to the US Black Chambers, Inc. (USBC), in 2022, the typical Black family had a median/average wealth of $44,900 compared to $285,500 for typical white families. This level of inconsistency highlights the continuing need for systemic changes. But what are some immediate steps we can take to lighten that burden?

Last year, USBC published the Black Investment Report. A resource that found one of the critical drivers of this economic disparity is the lower rate of Black participation in the stock market. About 65.6% of white families own stocks directly or indirectly, compared to just 39% of Black families.

Moreover, the median value of stock holdings among white families is $67,800, compared to a mere $16,500 median for Black families. Expanding Black investment in the stock market would not eradicate the wealth gap but could play a critical role in closing it.

The power of investment

Investing doesn’t have to be intimidating. Ron Busby Sr., president and CEO of the USBC, emphasizes that stock market investment requires not only careful planning and patience, but access to education and resources that can help beginner investors make informed decision-making.

“Investing your hard-earned money in the stock market by its very nature involves risk. It’s not a ‘get-rich-quick’ scheme,” he notes. Success in investing demands thorough research, strategic planning, and the discipline to weather market fluctuations.

Historically, the stock market has delivered strong returns. Despite its inherent volatility, over the last decade (2014-2024), the S&P 500 index grew by 233%, translating to an average annual growth rate of nearly 13%. While not every investment yields such large returns, diversified portfolios, especially through index funds, have proven reliable for long-term wealth creation. A $1,000 investment in Netflix in 2004 would be worth over $467,000 today. Even with impressive numbers like these, a large percentage of Black Americans are missing these opportunities.

That’s not to say that traditional wealth-building avenues such as homeownership, saving a portion of income, and budgeting should be ignored; those are still important strategies for making gradual economic gains. The stock market takes it a step further and offers individuals a unique opportunity to accelerate wealth growth. Stocks have consistently outperformed compared to other investment options, including gold, real estate, and government bonds.

Digital platforms like Robinhood have made investing more accessible by allowing users to buy fractional shares with no fees, making it possible to start small and grow investments over time, an option that benefits many new to investing. These platforms also provide financial literacy and educational resources, enabling new investors to learn about market trends and strategies to ensure they’re comfortable making choices. 

A 2024 Federal Reserve Bank of St. Louis report illustrates the deep racial disparities in wealth ownership. The State of U.S. Wealth Inequality report analyzes inflation-adjusted wealth for various demographics.

According to the report, despite comprising 65.9% of U.S. families, white households own 84.1% of total family wealth. In contrast, Black households make up 11.4% of families but own just 3.4% of the country’s wealth. These disparities show the importance of Black people having access to and actively participating in the stock market. 

A new era for Black investors

Today’s Black retail investors bring unique perspectives to the investment landscape. Nearly half are between the ages of 18-34, compared to just 21% of white investors. This younger demographic relies more heavily on social media for insights and tends to gravitate toward new and emerging asset classes, like cryptocurrencies. 

They even cite multiple reasons for participating in the stock market. While 91% are motivated by the prospect of making money in the short term, 87% see investing as a learning opportunity, and 66% view it as a social responsibility. Others consider investing in an exciting social activity that allows them to connect with others. 

Retirement plans such as 401(k)s, 403(b)s, and IRAs are some of the most common investments. In 2022, a record 54% of American families had at least one type of retirement account, but racial disparities also persist in retirement account ownership. While 62% of white families have at least one account, only 35% of Black and 28% of Hispanic families have the same.

Accessible investment strategies

For families seeking to increase their stock market participation this year, here are a few actionable steps you can start taking today:

• Invest small amounts using platforms like Robinhood to gain experience and build confidence. Even fractions of shares can have an impact.
• Online resources, workshops, and financial advisors are just a few ways to educate yourself and learn more about investment strategies and market trends. 
• Diversifying your portfolio reduces risk. Spread your investments across industries to give yourself the best chance of success.
• Always take advantage of employer-sponsored retirement plans and consider opening an IRA to give yourself tax benefits and compound growth. 
• Social media has changed the game for learning and sharing information. Black investors are across the internet sharing their experiences in investment clubs, social media groups, and forums.