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by MARY MANNION.
When it comes to investing, growing generational wealth is a key motivator for many women. In fact, 74% of Hispanic and Latina1 women respondents and 69% of Black women respondents cited building wealth for future generations as a top investing motivation, according to J.P. Morgan Wealth Management’s third annual Diverse Investor Study.
“If you want to build wealth over time, investing can be a vehicle for that,” said Veronica Navarro, Head of Communications for J.P. Morgan Wealth Management. “You want your money to have the potential to earn returns and accumulate enough over time to provide your children and future generations with more opportunities, greater security and a lasting legacy.”
Roughly half of Black, Hispanic and Latina women respondents reported being new to investing outside of employer-sponsored retirement accounts within the past five years, at 51% percent of Hispanic and Latina women respondents and 46% of Black women respondents. This is compared to 24% of all respondents.
“This is very encouraging,” said Danea Rouse, Director of Diversity, Equity and Inclusion (DEI) at J.P. Morgan Wealth Management. “It’s great to see more Black, Hispanic and Latina women taking charge of their financial futures and putting their money to work toward their ultimate goal of building generational wealth.”
The earlier a person invests, the more time their money has to potentially grow. Compounding – which is interest earned on the interest from your investments – can have a powerful effect over time. While investing in employer-sponsored retirement funds is a good start, there are limits to how much one can invest in them. Having a broader range of investments increases the chances of long-term wealth accrual.
Younger Black, Hispanic and Latino investors take a more hands-on approach to their investing than previous generations
More than half of Black, Hispanic and Latino millennial respondents (52% and 53%, respectively) reported taking an active role in choosing which stocks, bonds or index funds to add to their investment portfolios. This reveals a greater preference in active stock selection compared to Black Generation X and baby boomers (both at 45%) and Hispanic and Latino Gen X and baby boomer respondents (46% and 37%, respectively).
This finding is in line with a trend of increased financial literacy among diverse communities.3 Active stock, bond or index fund selection suggests a familiarity with products as well as a confidence in investing knowledge.
The finding is also a helpful reminder that investors can have a range of preferences when it comes to speaking with an advisor. Best practice for choosing a financial advisor often involves asking up-front questions to determine the right relationship fit.
“Knowing yourself and your preferences can be key in choosing the right advisor,” said Navarro. “Making decisions about money is very personal. The process involves reflection and trust.”
If you know you want full autonomy in choosing specific stocks, bonds or index funds, you might opt for collaborative management or a self-directed account. If you know you want active guidance and portfolio management, you can opt for a traditional full-service advisor.
The vast majority of Black, Hispanic and Latino investors surveyed are consistently contributing to their investments
This year’s results reveal a positive finding in terms of investment contributions. In the Black respondent group, 84% reported contributing the same amount or more toward their retirement accounts as they did in 2023, and 79% reported contributing the same amount or more toward their taxable brokerage accounts compared to 2023. In the Hispanic and Latino respondent group, 78% reported contributing the same amount or more toward their retirement accounts compared to 2023, and 73% reported contributing the same amount or more toward their taxable brokerage accounts compared to 2023.
One of the key components to building a potentially successful portfolio is continuing to contribute more funds to it when possible. In fact, setting up recurring transfers that move money on a regular basis straight from your bank account into your investment accounts – where you can invest that capital – can help power the effect of compounding, and help save mental energy and time.
“The fact that most Black, Hispanic and Latino respondents are staying consistent with their investment contributions is another encouraging behavior,” said Rouse. “Consistently contributing to your accounts is a focused wealth-building strategy.”
Bottom line
The 2024 Diverse Investor Study reveals positive trends in the Black, Hispanic and Latino investing communities, as well as a growing preference among younger investors to have a hands-on approach to choosing stocks, bonds or index funds for their portfolios. The survey also highlights the importance of growing a legacy of future wealth as a prominent motivator for investing.
See Original Article at Chase
