Economic Strategies for African-Americans as We Begin the New Millennium

Article excerpt

Introduction

History will record that one of the most memorable events for African American males towards the end of the twentieth century was the Million Man March on Washington, D.C. Among the significant activities, was the taking of the Black Man's Pledge; therefore, many of these men must have left pondering how to uphold the ideals of the pledge. The second sentence of the pledge states that, "I, from this day forward, will strive to improve myself spiritually, morally, mentally, socially, politically and economically for the benefit of myself, my family and my people." This paper is an attempt to address the economic aspect of the pledge.

Also, in a timely fashion, the News and Record, (March 14, 1999, A2) pointed out that Reverend Jesse Jackson has shifted focus to Wall Street. According to the article, he and his followers have bought stocks in more than 200 companies in order to have a say at shareholders' meetings. He has said: "We go to them as shareholders, not sharecroppers." Thus, at this time when the Dow Jones Industrial Average has been moving to new highs on a regular basis, it is incumbent upon African Americans to ascertain how to effectively participate in this wealth building boom in order to improve themselves economically.

Objectives and Procedure

The major objective of this paper is to examine some of the factors affecting wealth and finance in relation to African Americans and to discuss various types of investment strategies, which, with limited resources, can be used in order to improve one's economic status. Procedurally, the analysis will be presented as follows: (1) Background, (2) Preconditions for an investment program, (3) The investment process, (4) Investing at low cost with minimum risk, and (5) Summary and conclusions.

Background

In 1970 the per capita income of whites was $13,034 while that of blacks was $7,263 or 55.7 percent of whites. In 1997 these incomes were $20,425 for whites and $12,351 for blacks which was 60.5 percent of whites. Thus, during the period of almost 30 years the per capita income of blacks gained only 4.8 percent on that of whites and lagged 39.5 percent behind (U.S. Bureau of the Census, 1998, Table C-3). Therefore, while blacks are fighting for more and better job opportunities, they also have to be concerned about what they do with the little they earn. Proper savings and investments strategies can positively impact their small per capita income.

Boston, (96, 3) made a comparison of the wealth owned by blacks and whites per capita (Table 1). The table shows that the per capita net worth of Whites is almost five times that of Blacks. However, while on average Whites own only three times as much rental properties as blacks, they own almost thirty times the amount of stocks and mutual funds that blacks own. This is the widest gap for all asset classes. Therefore, this paper will focus on this area.

Table 1 Comparison, of Wealth by Blacks and Whites per Capita

                    Interest   Stocks   Home     Rental
        Net Worth   Earning    Mutual   Equity   Property
                               Funds

Black   $10,651     872        115      416      7196

White   $51,191     7308       3420     4561     21,627

Source: Kelvin Boston Smart Money Moves for African Americans (New York: G. P. Putnam's Sons, 1996), 3.

The NAIC Investors Manual (1994, 3) points out that "Capitalism will work better if people (a) understand investing, (b) are educated to do so successfully, and (c) intelligently provide capital to expanding industries. Investment education is essential to good citizenship in the modern world." Thus, it behooves minorities to be as financially literate as possible. According to Updegrave (Money, December 1989), "A number of black economists, researchers and financial advisers strongly believe that a minority of blacks hurt themselves by splurging on expensive cars, clothes and other consumer goods while neglecting savings. …