On a recent Friday afternoon, I was on my way to the movie theater with a couple of friends. The movie theater was located inside of a mall. As we drove pass the mall entrance, we were shocked to see a line of what we thought were eager movie goers. After finding a parking spot and getting out of the truck, we sighed at the idea of having to stand in a long line and possibly get terrible seats. As we got closer to the mall entrance we realized the 30 to 40 people were not in line for the movie but were waiting on something else. Curious, one of my compadres inquired what the folks were waiting in line for; the answer…a new pair of Nikes that were about to go on sale.
The majority of those waiting in line were people of color. I’m not passing judgment just telling you what I witnessed. You do have some entrepreneurial minded people who will purchase expensive sought after sneakers and resell them online for a higher price as a way of making a profit. However, you also have people that will spend their last dime on material processions just so they can look good. Again I’m not passing judgment because if we don’t spend money the terrorists win (sarcasm). At any rate; I begin to think about the things many people spend money on versus the things we invest in.
I want to present to you two contrasts. On one hand white households have about on average 6 times the wealth as black and brown households; $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families. On the other hand blacks have about $1 trillion dollars in spending/buying power in America. If $1 trillion was a country’s economy, it would currently be the 16th largest in the world. This $1 trillion of course doesn’t translate into more wealth, equality or privilege and there a lot of ills and disparities that continue to weaken communities of color. Nonetheless I ask the question, what are communities of color spending their money on?
A 2008 study (Conspicuous Consumption & Race) revealed that blacks spend more on luxury items like clothes, cars, jewelry and electronics than whites. Even though blacks often times have less, they spend up to 28% more on these types of items than their white counterparts, which is about $1900. According to the NAACP “a dollar circulates in Asian communities for a month, in Jewish communities approximately 20 days and white communities 17 days. For the black community it’s a total of 6 hours.”
Well what about investments? Research from 2011 revealed that only “46 % of blacks and 32 % of Hispanics said they had an individual retirement account or any similar retirement arrangement, according to a Washington Post-Kaiser Family Foundation-Harvard University poll. Half of whites said they had stocks, bonds or mutual funds, and two in three said they had IRAs, 401(k)s or similar holdings. Not only are African Americans and Hispanics less likely than whites to own retirement accounts or investment securities, they also are far less likely to own homes, which remains the largest engine of wealth creation for most Americans. And when they do own homes, they tend to have less equity in them, in large part because they live in communities where prices appreciate more slowly, many analysts say”.
Alright, enough of these negative but eye opening statistics. Let’s get to my point already. I’m writing this in hopes of encouraging you to invest and think about your financial future.
The easiest way to get your feet wet in investing is to invest with your employer. If your employer offers a 401(k) with a matching percentage, take advantage of this immediately. In essence this is free money. For those not familiar with a 401(k), it’s basically a savings account that is set up for your retirement. You select a certain amount of money to be deducted from your paycheck before taxes. In many cases your employer will provide a match percentage. For example; say you make $30k a year. Your employer may match 100% of your contribution up to 3% of your total compensation. So if you invest $900 your employer will match $900 which means you have invested $1800. Your employer may select the investment firm for your company but you control how your money is invested. Most plans will offer mutual funds composed of stocks, bonds, and money market investments of which you can be as conservative or aggressive as you want.
For those willing to take on more risk, you can select and invest in individual stocks of your choosing. This is the area where people can get a little bit intimidated. I have heard many myths from folks in communities of color as it pertains to investing in stocks. For most of my life I have heard; “you have to have money to invest in stocks”, “only rich people invest”, “that’s white folks stuff”, “you have to know math, accounting and tax law”. Speaking from experience, it’s not as hard as you think.
I knew I wanted to diversify and invest but didn’t know how. My first step was buying books and reading. A great resource was an “investing online for dummies” book. It was very basic, how-to information that took away most of my intimidations. Next was determining how much money I was initially willing to invest. I then researched the most cost effective, reputable and easy to use online brokers. Most online brokers will charge you a fee per transaction (not per share/s you purchase).
Once I had selected an online broker and added money to my account I then had to decide on what stocks to buy. A lot of “experts” will tell you to have as much diversity as possible. An example of a diverse portfolio could be;
- Minerals (gold, silver, mining corps)
- Tech (Apple, Microsoft, Google)
- Oil or petroleum
- Food (Yum Brands, Coca Cola)
- Transportation (airline, shipping or freight companies)
Some would say invest in companies or brands that you feel comfortable with as in with products you personally use. Some guidelines I would suggest are;
- Figure out what type of investor you want to be. Will you be conservative or aggressive? Are you in it for the long haul or are you going to gamble like you’re playing a slot machine?
- Be cautious of IPO (Initial Public Offering) launches. Groupon and Facebook stock prices plunged after launch.
- It’s okay to purchase stock when a company is doing badly. Plenty of companies go through hard times and rebound. It’s cool to purchase their stock when it’s cheap.
- If stock you purchased is preforming poorly for an extended period of time don’t be afraid to sell it.
- Be optimistic and educate yourself.
Having said all that, folks will still say “Well what about the money? Investing is expensive and I can’t afford it”. I would have to respectfully disagree and would suggest starting off with inexpensive stock. Once again I will use myself as an example. Below are some of the stocks I own, what they cost me per share then and what their value is now (as of the publish date of this article). I will use whole numbers to make it easier.
- Jet Blue Airways (JBLU) – Then $4.44 per share / Now $10.50 per share
- Delta Air Lines (DAL) – Then $15.86 per share / Now $39 per share
- Walt Disney Co (DIS) – Then $33.30 per share / Now $85 per share
- Microsoft Corp (MSFT) – Then $26.75 per share / Now $42 per share
- Phillips 66 (PSX) – Then $33.59 per share / Now $82 per share
As you can see, these are well known, name brand companies whose stock prices were not expensive. Also keep in mind I did not purchase these all at one time. By no means am I Warren Buffet or some cable news financial expert, so don’t take my testimony, experiences and suggestions as gospel. Do your own research and educate yourself to the best of your ability so you can be prepared and at least feel more comfortable. Nonetheless, I do feel that if I can do it anybody can do it.
This is YOUR money and finances we are talking about here. If we have money to spend on frivolous items like jewelry or clothes we can surely invest in our future and grow our wealth. Even if you don’t invest in stocks, invest in something that will help or enrich your financial livelihood for the future.