We Need a National Investing Initiative

Last week senators, congresswomen and seemingly the entire Reddit community was outraged that Robinhood stopped people from trading GameStop, AMC and other stocks for a few hours. How dare the platform of the people, by the people and for the people not allow the actual people to buy and sell the stocks of their choosing. There hasn’t been this much outrage in the market since Bernie Madoff’s monthly newsletter stopped showing up in the mail.

Husband: Honey, did you see Bernie’s newsletter anywhere?

Wife: No dear.

Husband: Aren’t you worried?

Wife: No dear. I’m sure we’re up 13%. If there’s two things in life I can count on, one is after dinner you’re too tired to have sex and two is that we’re up 13% with Bernie this month.

You know what’s more outrageous than Robinhood restricting trading or encouraging the next generation of investors to gamble on puts, calls and other short term options? It’s the fact that too few Americans, and particularly black and brown Americans, are investing in the market at all. According to a recent New York Times piece, “America’s richest 10 percent, who own more than 80 percent of U.S. stocks, have seen their wealth more than triple in 30 years, while the bottom 50 percent, relying on their day jobs in real markets to survive, had zero gains.”

The history of racism in America created outrageous wealth disparities and the stock market’s rise has only exacerbated those gaps. According to a recent study, “Black families’ median wealth is less than 15 percent of white families’ net worth – it stood at just $24,100 in 2019 to $188,200 for white households. Hispanic families held $36,100.”

There are absolutely more important ways to combat poverty in America than starting an investing initiative. President Biden’s team will likely attempt to reduce student debt by 10%, increase the child care credit to $3600/year and introduce baby bonds. But we should also create a national initiative to teach people about the power of investing and show people the “right way” to do it.

Yes, the market is likely in a tech-induced bubble. And yes, Mark Cuban says  ‘everyone’s a genius in a bull market.’ But there are three simple truths about the stock market that can’t be denied.

• From 1919-2019, the average annual return of the U.S. stock market was 9.4%.
• Historically, the stock market is the single best place to put your money. Better than real estate. Better than savings accounts.
• When the market crashes, and it will crash, it always comes back. There’s never been a time in history when it hasn’t come back.

Investing In Investment Education

We need a national investment education initiative that teaches kids from diverse communities about the power of investing early and often. A good place to start would be looking at the success of John Rodgers’ Ariel Community Academy. His program has been around since 1996 and teaches students how to invest real dollars that are later used to help fund the students’ own college education. Why not use Ariel’s curriculum, or something like it, in public schools across the nation? And why not get Fidelity, Vanguard and others to sponsor it? Better than putting Coke or Pepsi into school vending machines to create the next generation of soda drinkers, why not sponsor a nationwide investment curriculum to teach the next generation how to invest wisely?

While we’re at it, instead of giving everyone a free stock when they join, why doesn’t Robinhood give everyone $200 worth of shares of a low cost S&P 500 Index Fund that can’t be touched for a decade to drive home value of patience and  the power of compound interest?

The stock market shouldn’t be the exclusive playground of  wealthy, white elites. The market should be used by more people, from diverse socioeconomic and racial backgrounds, to generate the kind of returns that, over time, have the power to lift people out of poverty, expand the middle class and create a more equitable society.

This is the way. Or at least one of them.