Investing In The Black Community | Bankrate

One of the most viable ways to support the Black community is to put investment dollars in Black-owned businesses and other intentional investments that have a direct impact to work. While buying into Black-owned businesses is a great first step, there are ways to invest in Black-owned businesses that go beyond purchases and donations.

here’s how to invest in the black community, from patronizing black-owned businesses to taking a direct stake in black-owned businesses.

Reading: Black businesses to invest in

how to invest in the black community

If you’re looking to make a positive economic impact on the African-American community, you have several ways to do it.

Regularly shopping at Black-owned businesses is a good start to investing in the Black community. Whether this means dining at restaurants, shopping at a store, or performing personal services, choosing black-owned businesses for daily needs is a solid first step.

From there, there are several ways to put your investment money to work. investors can:

• choose black investment professionals to work with
• learn how to invest directly in black companies
• invest in black-owned stocks and startups
• invest in minority empowerment ETFs
• participate in peer-to-peer lending

invest in the black community in numbers

• In 2019, Black and African American-owned businesses generated an estimated $133.7 billion in annual revenue, according to census data.
• That same year, there were about 134,567 Blacks. or Black-owned businesses with more than one employee, with 1.3 million employees and $40.5 billion in annual payroll.
• The number of Black-owned businesses grew 8 percent from 2018, when the figure was 124,551.
• About 30% of those businesses were in health care or social assistance, the largest sector for black-owned businesses.
• In 2018, there were more than 3 million businesses not Black-owned employees – 5.6% more than in 2017.
• About 17% of Black women are in the process of starting or have already started their own business, despite the fact that only 3% have mature businesses, according to a Harvard Business Review article.
• fayetteville, north carolina, has the highest percentage of black-owned businesses, at 11.2 percent, according to census data.
• $35,205: the median amount of equity initial going to black entrepreneurs, compared to $106,720 for their white counterparts, according to the national bureau of economic research.
• in 2020, black business owners and founders received just 0.6 percent of all venture capital that was distributed.
• Although African Americans make up just over 13 percent of the nation’s population, they make up less than 2 percent of the US total. businesses.
• Black-owned businesses also face higher odds of failure than normal, with 80 percent failing within the first 18 months, according to the University of California-Berkeley.
• only about 34% of black families own stock according to a 2019 federal reserve board study, compared to 61% of white families.
• of those who owned stock, the The median value of stocks held by black Americans was $14,400 — about 25 percent of what their white counterparts owned, according to the same study.

determine the best way to invest

If you’re looking to invest in African American-owned businesses, you can do so using a number of traditional ways, including automated advisors, financial advisors, and even investing on your own.

• robotic advisors. robo-advisors are automated “robot” financial advisors and can provide financial assistance to those just starting out at a lower price than traditional advisors. Former Black Wall Street executive Trevor Rozier-Byrd created Stackwell, a robotic advisory app, with an all-Black management team to help the Black community invest smarter. The app’s creator said Stackwell’s management team “personally knows and has experienced many of the social, emotional, and cultural barriers that have resulted in underinvestment in the Black community.”
• financial advisers. Financial advisors are licensed individuals who create and execute financial plans for you based on your investment objectives. An advisor can offer personalized service and is a good way to learn about investing if you’re just starting out. You can support a black-owned financial advisor by finding one through the association of black financial advisors.
• invest on your own. If you are thinking of investing on your own, you have several options. can help black business owners raise and find capital to launch their own startups. Investing in minority empowerment funds and stocks in Black-owned companies can also make a difference. Minority Empowerment ETFs and ESG (Environmental, Social and Corporate Governance) investments help support companies that focus on social objectives, among other criteria.

learn how to invest in black owned businesses

Black-owned businesses are on the rise, but are still seriously underrepresented. To increase investment in the black community, investors have a number of actions they can take. Finding Black businesses to directly support and then further investing in Black businesses through startups, minority-empowered ETFs, and peer-to-peer lending are practical ways to invest your money in the Black community.

There are several resources you can use to find black businesses:

• byblack, developed by the us. Black Chambers, supported by American Express, provides the only national certification exclusively for Black-owned businesses. businesses must be at least 51 percent black-owned and provide verification documents. once verified, businesses will have access to share opportunity fund loan opportunities, as well as being added to the national byblack directory.
• black directory provides a directory of black-owned products and services with over 50,000 consumers on their email list, giving Black business owners a strong foundation for exposure. the site allows you to search for a product and then connects you with the appropriate black-owned business.
• black women-owned aims to increase the visibility of black women-owned businesses by leveraging social and media digital. black women use social media to find products and services 12% more than average.
• eat okra connects foodies with 9,000 black-owned restaurants and food trucks in their local areas .
• official black wall street allows business owners to create a listing with reviews and photos, and the app alerts users when they are near a black-owned business to increase foot traffic.

invest in black-owned stocks and startups

after finding black companies to support, you can see which publicly traded companies to invest more in their stocks.

A well-known black-owned stock is RLJ Lodging Trust (RLJ), a real estate investment firm that focuses on hotels. Another is Axsome Therapys (AXSM), a company that specializes in treatments for conditions of the central nervous system. Unfortunately, according to the impact investor, there are only about nine publicly traded black-owned businesses.

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As such, another option is to invest through Black-owned startups. It’s also an area where African-American business owners need significant help.

investing helps break the cycle of debt

According to a report by the Congressional Black Caucus Foundation, Black startup owners overwhelmingly turn to credit cards as a source of financing for their businesses, more so than their White counterparts. About 17.6% of black business owners use personal credit to finance their new businesses, compared to 10.3% of nonimmigrant white business owners.

Personal credit cards carry higher interest rates than bank loans, putting Black homeowners who rely on them for business capital at a disadvantage from the start. and many black business owners are limited by their need for capital. about 74 percent of black business owners use their own cash to finance their businesses.

By contrast, white entrepreneurs relied more heavily on bank loans than their black counterparts, and the study suggests that easy access to capital correlates with a higher likelihood of business success overall. only 1 percent of black business owners get a bank loan in their first year of business, and the average level of startup capital is around $35,000.

Helping African-American entrepreneurs gain access to capital through private funding is one way to help overcome this barrier. Angellist Venture, a platform for startups, is a good place to start. For example, on the site, investors could invest in the Global Black Syndicate, a global community whose goal is to close the capital gap for Black businesses.

investors can also use republic to build a portfolio of private company investments. republic allows investors to search directories of Black-owned businesses and startups and then see if it’s available on the platform to invest.

minority empowerment stfs

If investing in individual stocks or startups is too granular or difficult, investors can invest in a basket of securities through a minority empowerment exchange-traded fund (ETF).

The Morningstar Minority Empowerment Index selects United States stocks that meet the NAACP criteria for companies committed to diversity and inclusion. Using third-party research on environmental, social, and governance (ESG) practices, the index narrows down the companies in Morningstar’s large- and mid-cap index to arrive at its final list.

For example, securities classified in the correctional facilities sub-industry are excluded “because of racial disparities within the criminal justice system.” tobacco-related businesses, riot control-related products, and predatory lending are also out. companies with social-related controversies are also excluded.

Companies receive a score based on 18 different criteria, including gender pay equity programs, human rights policies, gender pay disclosure and discrimination policies. then qualifying companies are weighted in the index by their overall size.

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This index forms the basis for the NAACP Minority Empowerment ETF (NACP) Impact Stocks, which can be purchased on an exchange. In addition, the fund’s management company donates the net management profits of this ETF to the NAACP.

peer-to-peer loans

Peer-to-peer lending allows people to access loans from other people instead of using traditional routes, such as banks. Typically done through online services and applications, peer-to-peer lending gives people who have historically been ignored by financial institutions and traditional creditors the ability to access capital.

Peer-to-peer lending can be crucial for Black investors, who are already statistically less likely to have easy access to bank financing. Platforms like kiva offer microloans of up to $10,000 at a zero percent interest rate. These loans are crowdfunded and go directly to business owners.

You can become a kiva lender for as little as $5, and the platform lets you choose which areas you lend to. peer-to-peer lending is the financing of individual loans in real time. Often, the money comes directly from the lender’s bank account to the borrower’s checking account. For those who have difficulty obtaining a traditional loan from a bank, peer-to-peer lending may be a smarter option than taking on credit card debt.

Other peer-to-peer lending platforms include Prosper, which lends to people with a credit score of 640 or higher, and Circle of Funding, which is designed specifically to finance small businesses.

famous black investors

robert f. blacksmith. Smith is the founder, chairman and CEO of the private equity firm Vista Equity Partners. Before becoming a billionaire, Smith spent the early part of his career at Goldman Sachs in mergers and acquisitions. Since founding Vista, Smith has become a prolific philanthropist, donating millions of dollars to Cornell University to increase the number of black students and another $34 million to Morehouse University to pay off the debt of the graduating class of 2019. .

suzanne shank. shank is CEO, president and co-founder of the investment banking firm siebert williams shank & co. The firm is ranked among the most active underwriters of publicly traded equities, municipal bonds and corporate debt. The firm is one of the highest-ranked minority and women-owned investment banking firms in the country.

melody hobson. hobson acts as co-CEO of the investment firm ariel investments and is president of starbucks. She is also a board member of the Chicago Public Education Fund, works as the chair of extracurricular affairs, and is a member of the executive committee of the board of governors of the institute of investment companies.

john w. rogers rogers is the founder, co-chief executive officer and chairman of ariel capital management, the nation’s largest minority-managed mutual fund firm. He was featured alongside other legends such as Warren Buffet and Ben Graham in the book “The 99 Best Investors in the World”. He is a member of the board of directors of Exelon, McDonald’s, The New York Times Company, and most recently joined the Board of Directors of the Barack Obama Foundation.

daymond john. john is perhaps best known for his role on the popular television show shark tank, but he made his investment mark long before his television role. John was the founder, chairman and CEO of the fashion brand Fubu (for us by us). Since then, he has become a two-time New York Times bestselling author, focusing on teaching entrepreneurs. He currently serves on the board of directors for Petco, the UTSA Foundation, and the Network for Teaching Entrepreneurship.

through j. bell. bell was the founder and owner, in 1971, of the only black-owned company listed on the new york stock exchange. with just $175,000, daniels & bell, and grew the securities firm to a net worth of more than $15 million. He accomplished this by underwriting securities for minority-owned companies, as well as actively participating in larger distribution syndicates formed by investment banks.

end result

Those looking to start investing in the Black community have several resources. At the grassroots level, it’s as simple as making the conscious decision every day to patronize and support local black businesses like coffee shops, restaurants, barbershops, and more. Additionally, it is critical that Black investors and young Black entrepreneurs have access to capital, and investing through the appropriate channels to ensure investment dollars are delivered directly to Black entrepreneurs is an important step in the right direction.

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