According to data from Goldman Sachs over the past 140 years, U.S. stocks averaged 10-year returns of 9.2%, or to put it in dollars and cents, if you invested $1,000 a year for 10 years, or $84 a month, you’d turn that $10,000 investment into $17,000 within a decade.
But here in the US, not everyone believes the stock market is such a sure thing or is able to invest.
Research shows there are fewer African Americans investing than whites.
“61% of whites participate in the stock market whereas 28% of African Americans participate in the stock market, so almost double,” said Yosef Bonaparte, an economics professor at CU Denver who focuses on investing in the stock market.
He lists three reasons why people of color, particularly Black people, choose not to invest.
“The triangle is financially literacy, social risk, and the environment. White people in their house, they talk about investment. In the African-American community, they’re less likely to talk about investment because they have other things, struggle, food, safety, health, education, other problems they have. They don’t have the luxury to talk about investments,” said Bonaparte.
Another reason there are fewer Blacks in the stock market: many of America’s lowest-paying jobs are filled by African Americans and other people of color. Those jobs are less likely to come with a 401k, the retirement savings plan through which most Americans do their investing.
All of these reasons lead to a financial gap between Black and white investors.
“I hate that it is that way,” said Terrington Myles.
For Myles, the struggle is personal. He is a wealth adviser with a major investment firm, and he’s Black. He says there is a fear of investing and it’s just not something talked about in Black homes.
“Family members have had that experience working with advisers that didn’t have their best interests at heart or there’s just an education gap. If we’re not having those discussions at the dinner table and we’re not talking about it and you don’t see it,” he said.
There’s also another issue: Myles doesn’t see many people who look like him in the business.
“Financial advisers, on any given day, if you have 10, you’re probably going to get one of color. 10% might even be a little bit high,” said Myles.
Research shows that having someone who looks like you and has shared life experiences lead to more trust. And trust is key when it comes to finances.
Bonaparte really wants everyone to trust in investing.
“How to do it? You take 10-15% of your income and invest it in the stock market,” said Bonaparte.
Which companies should you buy? Well there is actually a really simple way to invest in multiple companies at the same time.
“You can buy an index, you don’t need to buy Apple, you don’t need to buy Amazon. Buy an index which is a bundle of many companies,” said Bonaparte.
The Dow Jones Industrial and the S&P 500 are a few of the most famous index funds, but there are index funds that encompass every company in the stock market.
Investing in the stock market is risky, but time in the market historically has helped Americans build a retirement and earn extra cash. It can help make your future financially stable as well.