Black, Latino Investors More Bearish Than Whites: FINRA

Black and Latino Americans are increasingly interested in investing despite market volatility related to the COVID-19 pandemic, but they're also more pessimistic about the stock market than white investors, according to the findings of two new research briefs by the Financial Industry Regulatory Authority Investor Education Foundation and National Opinion Research Center at the University of Chicago.

The research also found that low levels of investment knowledge underscored the need for more investment education opportunities among Americans, especially among Black and Latino Americans, according to the FINRA Foundation.

Overall, one in five Americans surveyed indicated an increased interest in investing.

Researchers found widespread awareness of stock market volatility among all investors and non-investors, but survey respondents reported making few transactions as the market disruption unfolded in early 2020.

Although four in 10 respondents reported a decrease in their willingness to take financial risk as a result of the market volatility, a comparison of their risk tolerance assessed before and after the pandemic started showed very little change, according to the findings.

Two of every five respondents (40%) reported now is a good time to invest, while only 24% viewed it as a bad time to invest, according to The Impact of Pandemic-Related Volatility on Stock Market Expectations and Participation.

That finding was mainly driven by households with taxable investment accounts, 50% of whom believe now is a good time to invest, compared with 41% of retirement-only investors and 24% of non-investors, according to the report.

Black and Latino respondents (24% each) reported increased interest in investing at rates greater than white respondents. Similarly, Asian respondents reported increased interest in investing at more than twice the rate of white respondents (49% vs. 19%), the report said.

For that study, the FINRA Investor Education Foundation and NORC at the University of Chicago surveyed 1,795 households from NORC's probability-based AmeriSpeak Panel, including oversamples of Black and Latino households. The surveys were conducted May 29-June 16.

More Market Pessimism

Although Black and Latino investors reported that their personal portfolios had not been as negatively impacted as white investors during the market volatility, these groups were less optimistic about the stock market, according to African American and Hispanic/Latino Responses to Pandemic-Related Volatility in the Stock Market.

Thirty-five percent of Black respondents expected the market to increase in the next year, compared with 41% of Latino respondents and 52% of white respondents, the report said. Similarly, Black and Latino investors were more pessimistic about how their personal investments would perform over the next 12 months, it noted. Nearly twice as many Black and Latino investors (both 10%) reported they believed their investments would perform worse than the stock market overall, compared to white investors (6%).

Black and Latino respondents followed the stock market less frequently than white respondents. "However, these differences appeared to be almost entirely driven by investor status," the report said. When Black, Latino and white respondents in the same investor categories were examined, no major differences were seen, it noted.

Awareness of market volatility, meanwhile, "varied dramatically" among race/ethnicity groups, the report said. Almost three-quarters (72%) of white respondents indicated the market had been extremely or very volatile during the first part of 2020, but only 42% of Black and 49% of Latino households characterized the market during that period as highly volatile, it said.

The FINRA Investor Education Foundation and NORC at the University of Chicago surveyed 1,718 Black, Latino and white households from NORC's probability-based AmeriSpeak Panel for that study, also conducted May 29-June 16.