Young Black People Are Investing In Stocks And Crypto, But Education Gap Is Cause For Concern

Young Black people are more likely to invest in stocks than their white counterparts, according to a recently published survey by Ariel Investments and Charles Schwab.

The survey, conducted in 2022, found that 68% of Black respondents under 40 invested in the stock market, compared to 57% of white under 40s. 

More Black Americans Investing In Stock

The 2022 survey compared Black and white survey respondents with an average household income of $99,000 and $106,000.

The study found that overall, the stock market participation is higher among younger Black Americans, with 68% of those under 40 now investing.

This is in comparison to 57% of younger white investors.

For many Black Americans, higher-risk assets are their first foray into investing, with one-quarter owning cryptocurrency, and among Black investors under 40, that figure jumps to 38%.

Black investors are also twice as likely (8%) to rank cryptocurrency as the best investment choice overall compared to white investors (4%).

An Education Gap

However, according to the study, there is clear evidence of an education gap between Black and white Americans.

Despite headline-making news about volatility in cryptocurrency values, platform hacks, and a lack of government regulation, Black investors are less likely than white investors to think cryptocurrency is risky (68% vs 73%).

Black investors are also more likely than white investors to believe cryptocurrency investments are safe and regulated by the government.

This mindset is even more common among Black investors under 40, with 51% believing it is safe and 41% believing it is government-regulated.

A Call For More Education

Nearly half of all Black and white investors report investing in something they did not fully understand, those under 40 in particular.

However, Black investors are likelier to trust and make investment decisions based on less credible information sources, such as social media.

One-third of Black investors (33%) said they have an investment based on something they saw on social media, compared to less than a quarter of white investors (20%).

“The confluence of low stock market participation, appetite for risky investment options, and alarming lack of knowledge about fundamental investing principles is a red flag about the critical need for greater investor education,” said Co-CEO and President of Ariel Investments Mellody Hobson.

“Many new and younger investors have never experienced market volatility like we’ve seen in the last couple years, and we have a responsibility to educate these new investors about the value of long-term investing to build wealth and achieve financial security.”

Historically, the survey has shown that Black Americans are less likely than white Americans to have discussed the stock market growing up.

However, the gap has closed today as Black and white investors are almost equally as likely to discuss the stock market with their families.

“You’re seeing topics of money and investing coming up at the dinner table slightly more among Black families than they had ever before,” said Arielle Patrick, Ariel Investments’ chief communications officer.

A Lack Of Trust In The Stock Market

Although Black investors place trust in cryptocurrency, they are less trusting of the stock market and financial institutions compared to white Americans.

Since 2020, Black Americans who either stopped investing or have never invested were more likely to cite a lack of trust in the stock market (36%) and financial institutions (25%), as well as having had a bad investing experience (15%) as reasons.

Black investors are also more fearful of losing money than white investors and are less likely than white Americans to feel respected by financial institutions.

However, that gap has decreased substantially, and Black Americans in 2022 felt more respected.

Although they felt more respected when it came to growing and protecting their assets, Black Americans are less trusting of people and more trusting of technology than white Americans.

Trust in technology among Black Americans is highest among men, new investors, and investors under 40.