Study Finds Race Plays Role in Investing

ByABC News
June 5, 2001, 10:18 PM

June 6 -- Blacks are 35 percent less likely than whites of similar means to invest in the stock market, with a devastating effect on their ability to accumulate wealth, a new study released today shows.

The report from Charles Schwab and Ariel Mutual Funds is based on a survey of 500 blacks and 500 whites who earn over $50,000, and was conducted in January and February by Neuwirth Research.

Good Morning America contributor Mellody Hobson, who is also president of Ariel Capital Management, said the disparity lies in part on big social and cultural differences.

Age vs. Wage

"Income is the biggest factor in whether blacks invest," Hobson told Good Morning America. "For whites, it's age. For whites it was typical to start investing around age 35. With blacks, on the other hand, age made almost no difference."

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Income, however, made a huge difference with black investors, she said. Specifically, the 2001 survey shows that blacks earning six-figure salaries are almost three times as likely to be investors as blacks earning below $75,000. At income levels of $100,000 and above, equal percentages of blacks and whites own stocks. Among white people, six-figure earners are only twice as likely to own stocks as those under $75,000.

The investment issue is a big reason for the wealth gap between black and white America, Hobson says.

"We're under-invested in the stock market, which over the years has generated the best returns of any investment," she said.

Wealth Divide

The survey found that the average wealth of blacks making over $50,000 a year was $158,000 while the average wealth of whites over that income was $273,000. As for retirement savings, blacks averaged $44,000 while whites had $69,000.

But children not retirement was an impetus for black investment, Hobson says. Blacks tend to want to invest in educating their children to improve their futures, over saving for their retirements.