WALL STREET Survey finds that black investors distrust market, are bailing out

Blacks investors are backing away from stocks, a survey says.
CHICAGO TRIBUNE
Marc Morial knows all about conservative investing.
The president of the National Urban League and former mayor of New Orleans grew up the son of Depression-era parents who taught him to be careful with his money. His father, a lawyer and the city's first black mayor, and his mother, an educator and bank board member, believed in real estate.
"It was tangible, it was touchable and it was seeable," said Morial, who, like many with close ties to that era, still has a strong and lingering degree of skepticism about stocks. "It was like the stock market was for very wealthy people. It was for people who could afford to lose."
Not alone
Morial is far from alone: One year after showing an increased willingness to dive into stocks, black investors are pulling back sharply in favor of more conservative investments, a survey has found.
The study by Chicago-based mutual fund adviser Ariel Capital Management Inc. and Charles Schwab Corp. found stock ownership by black investors who earn more than $50,000 a year sank to 61 percent earlier this year from 74 percent in 2002.
The retreat comes after several years of rapid growth in market participation by black investors, up from 57 percent in 1998, the first year of the survey.
Indeed, some experts thought last year's level of stock ownership by blacks, in the face of an extended market downturn, might have signaled a significant break from historic investing patterns.
Not sure now
Now, they're not so sure. White investors have -- rightly or wrongly -- shown a greater willingness to stick out the market's gyrations: Their ownership at the same income level was 79 percent this year, which has been virtually unchanged over the survey's history.
A recurring theme of the survey is black investors' tendency, for a variety of reasons, to lean toward more conservative investments.
Experts said corporate scandals and the disproportionately high black jobless rate have helped to lead the shift back in that direction.
Plus, of course, a stock market with three consecutive years of losses.
"African Americans are new to the party," said Ariel President Mellody Hobson.
"This has been our first experience for many of us with a bear market, and our first inclination was to get out and preserve what we had."
If anything, Hobson said, the surprising finding is white investors' willingness to remain in stocks, which she attributes to greater experience with the ebb and flow of the market.
Behind the scenes, however, many white investors have been pulling back as well: More white than black investors said they had sold some stocks or mutual funds in the past year, though few cashed out completely.
"Everyone was taking a wait-and-see approach, and when the market didn't turn around ... I think investor confidence was further undermined," said Schwab Vice President Carla Foster.
But some experts said the pullback among blacks may be only temporary, particularly if the recent market rally continues.
Prediction
"As you see the market swing back up, you'll see a lot of people, including African Americans, get back into the market," said Al Perkins, chief executive of Blackstocks.com Inc., which is devoted to encouraging minority participation in the stock market.
Perkins, however, said black investors may be more cautious about reinvesting in stocks, noting that, in general, they joined in the bull market of the 1990s more slowly than others.
The likelihood of a slower return may well be borne out by evidence of black investors' greater wariness -- or downright mistrust -- of the market.
The survey, conducted in January and February, found just under half of black investors said they "just don't trust the stock market" with their money. That's up from 38 percent last year, and compares with one-third of whites.
The percentage of black investors who said they agree that "the stock market continues to be the best place for long-term investing" sank to 46 percent this year from 67 percent two years ago.
Among white investors, 62 percent agreed this year, down from 82 percent in 2001.
"The trust gap issue has been there from the beginning," Hobson said, in part because of the lack of diversity among market professionals.
"We don't know people like us who work in the financial-services industry."