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Stock Market Investment Has Become More Accessible

Article written by Sandra Wilson

It likely won’t come as a surprise to many readers that in American investment markets, Blacks are severely underrepresented in comparison to whites. This is an issue that’s actually come up in recent discussions stemming from the mass movement to racial equality we’ve seen throughout the summer of 2020.

To put it simply, the stock market and broader economic system has failed Black Americans. Because median household wealth is roughly 10 times lower in this community than in white communities, there is simply less expendable income for investment. And because investment is viewed by most as an expensive endeavor in and of itself — demanding significant funds and charging high fees — it’s something many in the Black community feel they don’t have easy access to. (Retirement saving actually involves similar unfortunate discrepancies.)

With that being said, there is actually some evidence that in recent years, more Americans from Black communities are investing in the stock market. Specifically, a 2019 report found that 67% of those with more than $50,000 in annual income are invested in stocks or mutual funds — compared to 60% in 2010, and 57% in 1998. This doesn’t necessarily solve issues of saving and investing affordably for those with lower income. But it’s still a positive trend — and one that we’re betting would become even more pronounced if more people recognized just how accessible the stock market has become.

The truth of the matter is that there are more ways (and simpler ways) to invest in the stock market — even with limited funds — than perhaps at any point in history. The following may be particularly appealing to those who are new to the markets, or wish to invest smaller amounts to start with:

Mutual Funds

Mutual funds are not new, but there appears to be a greater variety of them now than in past years. These are trading arrangements in which numerous people put in money (of varying amounts), and a professional trader pools that money and invests it in a strategically diversified portfolio. When you decide to withdraw your money, you earn a portion of the total investment’s return proportional to what you contributed. The downside of these arrangements is that the professionals running mutual funds take a cut. But again, there are more mutual funds of varying structures now than in the past. We won’t recommend a specific option, but what this means is that there’s generally a fund for everyone — even those new to the market, or those investing with limited finances.

CFDs

The process of trading CFDs on stocks is somewhat more complicated than buying into a mutual fund. In this case, you’ll need to make your own investment decisions, which means getting to know the market and learning to read it strategically. However, CFD trading is still more accessible to beginners, simply because it takes some of the pressure out of trading. In an ordinary stock trade, you would buy shares of a company and hold onto them, watching the market for a strategic point at which to sell for a profit (or to cut a loss short if it’s going poorly). In CFD trading, you make all of your decisions at the outset — buying (or “selling”) a contract in an stock price over a defined period of time. Buying earns a return if the price goes up, and selling does the same if it goes down — and you’re never left holding shares and wondering when the right time to sell them might be.

Mobile Investing

Maybe the most appealing option of all to new traders — and the main development that’s made the markets more accessible — is mobile trading. The idea speaks for itself, and refers to mobile apps that can serve essentially as semi-automated pocket stock brokers. Many find these apps both more appealing and less intimidating than traditional broker services. Additionally though, some of these apps are built specifically to welcome beginners with features like automated trading and tailored advice.

Through these methods, it’s fair to say that the stock market has in fact become a little bit more accessible. This could be a particularly good thing given that we’re already seeing a slow but sure uptick in Black investment. So, as we asked in a pat look at financial security planning questions to consider: What are you waiting for? The sooner you get started on developing a strategic investment strategy, the sooner you’ll start generating returns.

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Black Westchester - News With The Black Point Of View is an online news magazine for people of color for Westchester and the Tri- State area of New York at every economic level. Our mission is to promote the concept of “community” through media.
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