African-Americans are more bullish on the stock market than they have ever been, but they're still not investing enough, according to the most recent Ariel Investments Black Investor Survey.
The poll of 500 whites and 500 blacks taken between June 12 and July 19 last year found that African-Americans were significantly more optimistic about the economy (75%) than whites (50%). And 65% of African-Americans felt that the economy has fully recovered since the recession, vs. 40% for whites.
“This is such a big change from what we've seen in past years,” said Mellody Hobson, CEO of Ariel Investments. “African-Americans were disproportionately affected by the recession in terms of layoffs, and the survey suggests that people are getting back to work.”
The number of African-Americans investing in stocks continues to rise, but also continues to lag white participation in the stock market. Of the African-Americans surveyed, 67% had invested in the stock market, while 87% of whites were invested in stocks. In both cases, stock market participation had increased by seven percentage points since 2010.
For African-Americans, participation in the stock market increased with income. Of those blacks surveyed who had $50,000 to $100,000 in household income, 57% were stock investors. That figure shot up to 81% for African-Americans with more than $100,000 in household income. Higher incomes encourage higher white stock market participation as well, but the effect is not nearly as sharp, the study shows.
One strong force behind the shift to stocks by African-Americans: Auto-enrollment in workplace retirement savings programs. “Those are the gateway to people of color,” Ms. Hobson said. “We'd like to dial it up one more notch to auto-escalation.”
African-Americans who are 65 or older are less likely to invest in the stock market (56%) than those under 40 (67%) and those 40-49 (72%). In part, this may be because historically, African Americans have been more likely to work for the government, trading higher pay in the corporate world for the security of a pension, Ms. Hobson says. This trend may be fading among younger workers, as government pensions become less generous.
In 2015, 44% of African-Americans said that retirement was the most important savings goal, up from 33% in 2000. At the same time, more African-Americans are expecting to work longer and retire later. Just 17% expected to retire before age 60 in the 2015 poll, vs. 42% in 2003. Among whites, early retirement expectations have fallen to 10% in 2015 from 28% in 2003.
The percentage of African-Americans who ranked real estate as the best investment overall ticked upwards to 37% in 2015, after plunging from 61% in 2004 to 30% in 2010. Meanwhile, stocks were rated the best overall investment by 41% of African-American respondents in 2015, up from 28% in 2004.
“The whole real estate story continues to be a really remarkable shift,” Ms. Hobson said. “When the real estate bubble burst, it had a dramatic effect on lots of Americans.”
The biggest disappointment in the survey for Ms. Hobson: A strong belief in market timing among African Americans. “It's faulty thinking,” she said.