Survey Finds Racial Divide in Attitudes Toward Investment
African American households with incomes exceeding $50,000 are far less prepared for retirement than their white counterparts and less likely to invest in the stock market than in insurance and bonds, according to a new survey.
In a study unveiled Wednesday that was commissioned by Ariel Mutual Funds and Charles Schwab & Co., African Americans revealed attitudes about saving and investing that are in many ways vastly different from those of whites.
These include less trust of investment advisors, less exposure to the stock market in their upbringing and a preference for real estate and insurance over stocks.
Forty-six percent of blacks surveyed consider real estate the best investment overall while 50% of whites said stocks are the best vehicles for financial growth.
“There are very real barriers to increasing black investment in stocks and stock funds,” said John Rogers, president of Ariel Mutual Funds. Those investments historically have provided far greater returns than insurance policies or bonds.
According to the survey, just 57% of African Americans reported having any money in the stock market compared with 81% of whites. African American households have an average of $117,000 saved or invested in any type of account, while whites have $224,000.
Blacks on average have $42,000 tied up in retirement vehicles such as IRAs and 401(k)s, while whites have $88,000.
In terms of other investments, 51% of the whites surveyed had most of their money in brokerage accounts or mutual funds, in contrast with 26% of blacks, and 41% of blacks put most of their money in banks, contrasted with 35% of whites.
Twenty-six percent of blacks had the majority of their money in insurance companies, against 10% of whites.
“African Americans are preparing more for death than for life,” said Mellody Hobson, a senior vice president at Ariel. “We have a lot of comfort with insurance, for some reason.”
In fact, 63% of African Americans surveyed described themselves as conservative investors, compared with 53% of whites.
A full 75% of blacks said they could “never really know whether they can trust a financial advisor” while 84% said it’s difficult to choose a good professional. Also in that conservative vein, while roughly the same percentage of blacks and whites have insurance policies intended for retirement use, blacks on average have policies valued at $288,000 while the policies of whites are valued at $252,000.
The survey, which compared the investment habits of 500 African Americans and 732 whites in households with incomes of $50,000 or more, was conducted in January by Yankelovich Partners.
