What Do You Invest In?

By OckyDub | Posted Jun 27 2014 | 8 Comments  

Investing

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
  • Pharmaceuticals
  • 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.

About the Author
OckyDub

Octavius is a founder and editor of Cypher Avenue. He's here to help speak for us and show the world that masculine gay / bisexual men of color are not a part of the stereotypical gay normal that is seen and fed to the masses. No...we are a distinct breed, filled with character and pride. Cypher Avenue is here to show the world how we are different.

   
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8 Comments Feel Free To Join The Cypher.

  1. African King | June 27th, 2014
    +2

    Very well written article here.

    I learned from my parents to save and budget my money so that’s what I put into practice right now. When I get older and have a steady income, I will definitely look into more investments and money management.

    I come from a neighborhood where the black and Latino populations definitely always wanted to have the latest thing in fashion, footwear and technology. You’ll wonder why someone had a very nice car, new pager, or the latest cell phone but yet they keep asking people for gas money or some dollars to hold for buying fast food. I would always wonder why things were so backwards. Then I moved to a middle-class predominately white (and Asian/Indian) area and I noticed how they were so diligent with money and I’d hear about how all these Asians and Indians own gas stations, Subway restaurants, and other businesses. After that, then you see them make big purchases on houses, cars, etc. I think if black/Latino people who do practice the habits of just spending on material things were educated on finances then, things would be better.

    I remember being in high school and watching the news and there was a panel discussion. Someone on the panel expressed disgust at American education system because he felt US education doesn’t teach kids basic life skills like balancing a check book, budgeting money, or anything else that would help kids understand the transition to growing up and understanding how to utilize money. I agree.

  2. Richard | June 27th, 2014
    +1

    Great Post! I’m an avid reader of Black Enterprise magazine that also advocates investments, but student loans(still accumulating) have kept me from doing so. Should student loan debt be an excuse?

    • Ocky Williams | June 27th, 2014
      +2

      Keep in mind you are already investing. Having student loans means you invested/investing in your future. Reading BE magazine is helping you gain financial knowledge; again an investment…but to your question. Yes it is an excuse. I have student loan debt. I would suggest you pay your self first by having a savings account but also having an account where you put money aside to invest in stocks at some point.

  3. LEE B | June 27th, 2014
    0

    This is some good stuff right here good article man!!!!!

  4. RoyBK11 | June 27th, 2014
    0

    Great article. I have been visiting your site since it was Discreet City and you guys always produce well-written, thought-provoking articles. I too want to invest my money for the future. Especially, since I see my mom struggling with money now even though she have her own business. However she never invested to make her business grow nor managed her money properly. I have gave her a few suggestions in the past, but she brushed it off. Plus she constantly have some “get-rich quick” scheme that always fails. I don’t want to end up like her, breaking your back for decades and have nothing to show for it.

    I wanted to do an IRA or Roth IRA with my credit union, but keep on putting it off, but after reading your piece, I going to set up one as soon as possible. I know my second job offers a 401 K plan, but for some reason I just don’t trust 401 K’s. I will most likely look into stocks and bonds. I have a $50 saving bond I bought around two years ago when I was doing my taxes and wanted to get more and was told I can buy them at my bank.

    I wanted to have stock too, but thought it was too expensive, but seeing how cheap it is, I will look into it. I know will have a very conservative approach to investing since I don’t make much now. I will start off slow with the IRA and a few small bonds. As time goes by and I have a better income, I will save and investment my money religiously.

  5. SwagJack
    SwagJack | June 28th, 2014
    0

    Investing and saving your money is always a better option. While there is an admirable entrepreneurial spirit in flipping kicks in sneaker head culture (I was definitely in that number at one point), the bigger concern is what you’re doing with your profits. If your aim is to funnel those profits into a business with those profits (which is how Flight Club started out), more power to you. But if you’re just looking to funnel that into a trendy fashion purchase, then you’re really no different than the person you sold those kicks to.

    The wealth gap is real, but a lot of it boils down to education. Not just collegiate educational attainment, but budgeting and wealth building education. A lot of salt of the earth, blue collar black folks (which is what the majority of my family is comprised of) just don’t understand that they could also be investing their hard earned dollars and making those dollars work just as hard, in turn, for them. The misconception is that investments are for “rich, white folks.” I got in on a tech stock early enough and got lucky. Then I turned around and unloaded all my shares. But the experience taught me more about what was possible with money that would have normally been expendable income. There are so many viable options.
    And there are also so many people from our own community who make it their business to inform and educate. Google Jullien Gordon. Dude is the truth.

  6. klothesmindedsince78 | June 30th, 2014
    +2

    I concur with most of my Cypher Cohort on this subject. Many parents, schools, and even churches do not teach the responsibilities of proper financial planning. Unfortunately, it manifests itself at all the wrong times (i.e. when bills are due, when a family member passes away, or when it is time to take the next step in life – buying a house). I do have a 401K that is through an outside company (not my job) because my state retirement is something called a 403B. I’d like to think that between the two – and other investments that I should be o.k. for retirement. I just have to work on building at bare minimum $5,000 in my savings account. Its a struggle though because I STAY “Clothes Minded”

  7. Th€_p0inT | July 1st, 2014
    0

    I really appreciate this article. I’ve been making this same case for eons it seems.




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