The Dallas Examiner
African Americans lead nationwide poverty rates, just slightly edging out Native Americans, per the United States Department of Agriculture. Even when educated and employed, 27 percent of African Americans continue to live below the poverty rate, according to the U.S. Census Bureau. Building wealth in the Black community has been an ongoing struggle for many years.
While investing in the stock market could be part of the solution, African Americans save and invest at a much lower rate than Whites, according to a national study conducted by Chicago-based Ariel Investments. The study showed Blacks were more leery of the stock market.
“I believe the more you know, the more you can grow,” stated Linda Gray, president and CEO of the Greater Southwest Black Chamber of Commerce, as she considered the purpose of the program Taming the Gold Bull Part 1: Learn How To Invest In The Stock Market. The event was held at the GO Federal Credit Union in Lancaster on July 19.
Kevin E. Davis, CFP, gave a lunchtime lecture entitled How To Invest In The Stock Market during the workshop. The event, hosted by the Greater Southwest Black Chamber of Commerce Young Professionals, was intended to demystify the process of buying and selling stock, an endeavor that is sometimes half-jokingly called “legalized gambling.”
A careful scrolling through the Forbes tally of the world’s 2,043 billionaires reveals that Oprah Winfrey, Michael Jordan and Austin investor Robert Smith are the only Black Americans on the list of an otherwise globally diverse high-roller club.
While not everyone can be a billionaire, the stock market workshop assisted those interested in better preparing for their financial future. Davis voiced some of the considerations potential investors had to ask themselves, including what type of industry they would invest in – such as health or technology – what their financial objectives would be and the number of shares to invest in.
“You can buy 10 shares, you can buy five shares. And now, because of technology, those orders get placed. Probably, if you had to do that 15, 20 years ago, you probably wanted to do it at 100-share lots,” he explained. “Technology now is so efficient, you can buy five shares, 10 shares, whatever the case may be.”
Some of the financial planner’s talking points included deciding what trading company to use. That meant the buyer would have to do some research into companies to learn their policies, histories and the pros and cons of going with one brokerage over another.
Concepts that were introduced, such as the price to earning ratio (also called the P/E, dividing the price of the stock by the predicted earnings per share) and purchase orders or sell orders (shares sold at current market price vs. shares sold at a stockholder’s specified price), were discussed in detail, and Davis always took the time to answer any questions from the small audience.
The attendees, all African American women, inadvertently represented a subset of peoples historically underserved in the U.S.
“When it comes to the Black community and women, we really need to step up our game and be able to take advantage of a lot of those opportunities that are out there for us,” Gray said. “And to have someone like Mr. Davis come out and share his expertise, his knowledge with us, that’s just added value to our purpose. You know, part of our mission is to educate.”
Sheena Clark, vice president of the Young Professionals, agreed.
“There’s never too much to learn. There’s always room for growth. Always. And I say take as much as you can. You can never have too much knowledge,” she said.
As the workshop continued, Davis attempted to diminish some of the misgivings a potential new investor might have.
“What do you do if you buy a stock and the price goes down?” he asked. “You lose money on paper, but if you don’t sell it, you don’t actually lose money until you actually sell it. If it goes down in value, what are you going to do? Do you have the nerves to wait? If you bought a share at $80 and it goes to $70, what are you going to do?”
As the audience weighed options about the scenario, the speaker segued into his next point.
“One of the things about buying individual stocks [is] you have to come up with a strategy,” he remarked. “What is my goal? And that goal could be, ‘OK, if it goes down 20 percent, then I may get out of it – or if it goes up 20 percent, I may want to get out of it.’”
“Stock prices fluctuate throughout the day,” Davis affirmed. “Not only on a day-to-day basis but even through the day. [They will] give you one price in the morning; it’ll be $4 higher in the afternoon.”
This is why a strategy would be important, he noted.
“In most cases, if you invest in long term purposes – and long term being four or five years, or longer – then you can watch it go down, then you can just watch it go back up.”
However, this strategy means studying the trends and risks of the invested company, keeping an eye on the overall economy, considering the activity in Washington, D.C., and diversifying a portfolio with a variety of stock, the speaker emphasized.
“Are you familiar with Enron, down in Houston? They were basically cooking their books.” Davis mentioned how he worked with a regional company and went to one of their presentations.
“They said they’d never invested in Enron because they could never understand what kind of business they were,” which lead to a further lesson on diversification.
“A lady in Houston, after that, she’d worked at Enron. She had her entire 401K planned in Enron stock, and at one point she had $400,000. When she left Enron, she had zero. Zero dollars because she had all her eggs in one basket,” he confirmed.
There was no specific mention of when Taming the Gold Bull Part 2 might occur, but Clark stressed that such education programs would continue.
“I feel like, each one, teach one. What I learn here I can take to someone else.”
The vice president underscored how important it was her for to continue passing on such knowledge.
“I just feel like this is stuff that is not taught in school. It should be taught in school because when they get out into the real world they need to know this stuff,” she added. “Stock was never even mentioned in high school and I took a business class – and they never mentioned stocks.”