Black investors are returning to the U.S. stock market after retreating in the aftermath of the recent three-year bear market, according to a survey released Wednesday.
“We are really excited and heartened to see that blacks are coming back to the market,” Carla Foster, vice president of Charles Schwab Corp., said in an interview. “Last year, I was very worried that this might signal a long-term retreat from the stock market.”
Schwab, along with the Ariel Mutual Funds, co-sponsored their seventh annual survey of black and white households earning more than $50,000 per year.
68% of blacks have money in market
Based in San Francisco, Schwab is the largest U.S. discount brokerage firm. Ariel Capital Management LLC, which manages $17 billion, including four mutual firms, is a black-owned firm headquartered in Chicago.
The latest survey, conducted during late February and March, found that 68 percent of blacks have money invested in the stock market, either through direct ownership of stocks or through mutual funds. That compared with 80 percent of whites.
Ownership of stocks among blacks was up from 61 percent last year, when there was a sharp drop from 74 percent in 2002. The percentage for whites has hovered around 80 percent since the first survey in 1998.
In 2003, all three major U.S. stock indexes ended the year with gains of 25 percent or higher — a sharp reversal from the steep drops seen in each of the three previous years during a protracted bear market.
So far in 2004, the blue-chip Dow Jones industrial average is down 0.6 percent and the tech-laced Nasdaq Composite Index is off 0.5 percent. Only the broader Standard & Poor’s 500 Index is higher — up 2 percent for the year to date.
Investment myths vs. reality
The Ariel-Schwab survey, as in previous years, showed some big deficiencies in knowledge of investing among both black and white investors.
The latest results found that 75 percent of blacks and 54 percent of whites could not correctly answer six out of 10 multiple-choice questions about basic investment facts and terminology. Among those who were investors, 69 percent of blacks and 48 percent of whites answered fewer than six questions correctly.
Twice as many blacks as whites, 30 percent versus 15 percent, considered knowing how to time the market more important than investing regularly for the long term. The misperception was seen as one reason blacks are under-invested.
Fully 61 percent of blacks and 51 percent of whites said real estate is the best investment overall. Throughout the survey, blacks have consistently named real estate as the best investment, Foster noted. This was the first year that a majority of both black and whites said real estate was the best investment overall.
Asked how financial services companies could help promote better understanding of investments, Foster said one approach is to reach out to younger people through programs in cooperation with groups such as the Boys and Girls Clubs.
The telephone survey was conducted by Argosy Research. The poll used a random sample of 500 black and 500 white households earning more than $50,000 annually.