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Investing More Diverse than You ThinkSubmitted by Personal Money Planning on December 18th, 2018
By Gary Silverman, CFP®
I was reading the comments on a Facebook post the other day. As often happens, discussion had strayed far away from the original topic. At one point, a commenter stated that investments like stocks have no relevance unless you’re a rich old white guy. He went on to say that the stock market was a “club” and that there were secrets involved that kept him out of the “system” and unable to make any money from it.
Is that the truth? Well, if you’re a conspiracy theorist, anything I say would just be a coverup of the hidden truth, as I’m obviously part of the inner sanctum. If that’s the case, I suggest getting a nice cup of cocoa and heading to the comics instead.
And that’s the thing. Almost any comment I make here will to some (I hope not many) elicit a response that begins, “You can’t tell me….” And with that statement I’m reasonably assured that indeed, I can’t tell you—at least not in a way that will dissuade you from your beliefs. You’ve made up your mind and you’re not about to change it for me.
This is why I really need to stop reading Facebook posts. At least I’ve learned not to respond to them (well, usually).
According to a study by Morningstar, just over half of American households are invested in the markets. That number climbs to over 60% for working households. Of course, saying “just over half” are invested is the same as saying that “almost half” are not invested. So, whether the average person is or isn’t in the markets is pretty much a tie. But if it’s a club, it’s a really big one.
This club is pretty diverse. While I’m not sure where “old” begins, Morningstar shows that 25% of investors are under 37. This makes sense in that it takes a while to move up in the labor market and pay. It also takes a while to pay off student loans, accumulate furniture, etc.
As for ethnicity, a bit more than a quarter of investors identifies as something other than of European descent. I’m not sure what side of that line I’m on, as according to 23 & Me half of me is Asian and the other half Western European. Still, if a bit more than a quarter is other than “European descent” (code for white folks) then indeed the majority of American investors are white.
Then again, the majority of Americans are white (declining, but still in the majority) and we know that they are overrepresented in higher earning economic groups. My take is that it isn’t the lack of investing opportunities for minorities that causes them to be in lower economic groups but the fact that minorities are overrepresented in those lower economic groups keeps a higher percentage from investing.
After all, you need to pay for the essentials of the present before you can invest for the future.
Oh, and while not being poor obviously helps folks with the ability to invest, you apparently don’t have to be rich either. Of the 60% of working households that do invest, over one-third of them make less than $53,000 per year.
Make of it what you will, but investors sound like a rather diverse group to me.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing