Financial Markets Are The Greatest Equalizer

The pandemic has shed light on humanity’s greatest challenges, with racial tensions being on top of mind. It’s safe to say that America’s shameful history of discrimination against people of color has creeped up once again. As a result of this unfortunate reality, African Americans & Hispanics are also far less represented when it comes to holdings in the stock market. According to the Federal Reserve Bank Of St. Louis, the wealthiest 10% of US households owned about 83% of equity holdings. Many Americans, regardless of race, don’t get to experience the risks and rewards associated with equity markets. 

Investing in financial markets requires a steady source of income, a degree of trust in the financial system, and access to financial resources. As you dig deeper into the generations of divide that has occurred in the United States, you begin to realize that systemic racism in the country has resulted in missed wealth creation opportunities for African Americans & Hispanics. Let’s dive in further and assess why the stock market participation between African Americans & Hispanics relative to their White counterparts is considerably lower. 

Wage Discrimination:
Lower incomes for black and hispanic people have contributed to generations of wealth disparities. This has also translated into far less exposure to the stock market. Investing in the market is an essential source of wealth as it can play the role as side income, retirement income, or even wealth growth that can be used to pay off your kids’ college tuition. However, since it is subject to volatility, the stock market is no guarantee of wealth creation in the short term. It is a vehicle to help savers accumulate wealth through long term and diversified investment strategies. How can we level the playing field for minorities, specifically blacks and hispanics? There is no easy answer for this. However, I was intrigued when I came across an article in the WSJ on no longer requiring previous wage history of applicants when applying for a new job. If a new employer has no previous history of what you earned at your last job, the applicant is more likely to get a competitive compensation package at the new job.

Source: WSJ

Higher wages undoubtedly leads to more wealth, contingent upon an increased awareness of your personal finance habits, type of lifestyle, and an aptitude for wealth creation.

Access To Higher Education:
According to the Center for American Progress, there continues to be serious gaps in access to higher education for black and hispanic people. Getting into college is no longer enough, studies have shown that black and hispanic students are also much less likely to graduate. There tends to be a big underrepresentation in key career paths such as engineering and science. Although numbers have improved, education alone still hasn’t made things equal when it comes to stock market participation. 

Source: WSJ

Access To Financial Resources:
Fin tech has made taking the plunge into investing as little as $1, so much easier. This is primarily the reason why fighting for equal wages for blacks & hispanics is so crucial. Equal opportunities for advancement & rising wages permits more savings which can be put to work in the stock market. A movement has started, but we must do more as a country to ensure that people of all races receive an equal chance at wealth and prosperity. Think about how much potential we have, if people of all races, had an equal opportunity to participate in America’s equity markets. Tapping into fin tech apps such as Stash, Acorns, Robinhood, etc. can only be made possible when there is an equal awareness of the broader societal problems that we face. Problem solving starts at the top, and when done correctly and relentlessly over time, has the power to make change possible. When a minority group has to constantly live below their means, investing can only be a dream.

The Greatest Equalizer:
Think of all that we can accomplish with wealth equality if we can fight racial injustice. If we continue to fight discrimination in all forms, we can allow a greater percentage of the population to reap the benefits of investing. The stock market is the one thing that doesn’t discriminate when it comes to sharing wealth in the form of capital appreciation. If you invested in well established companies (i.e. Microsoft, Disney, Apple, Intel, etc. to just name a few) since the last financial crisis, you made out incredibly well, regardless of your gender or race. It’s as simple as that.

US markets have performed well historically relative to the other global markets because some of the world’s greatest companies operate here in the United States. Despite there currently being a significant disconnect between Wall Street and suffering businesses on Main Street, I’m fully confident that the United States will continue to remain the best place to invest for decades to come. It is easy to make money in a rapid expansionary bull market. However, it takes a calm and collected mindset to succeed in choppy waters, like what we are experiencing right now. Therefore, with equal opportunity for underrepresented minorities, we can allow greater participation for all, in both bull and bear markets.

This blog and the information contained herein is not a platform for guaranteed success on investments. The companies I mention in my posts are NOT recommendations for investments. The views expressed are my own and I strongly suggest to do your own research prior to making any decisions. Because the information on this blog is based on my personal opinion, research, and experience, it should not be considered professional financial advice. The blog is a discussion forum and not a website for access to financial data. I have no access to material non-public information nor any discrete information on publicly traded companies.


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