Stock Investors Are Younger and More Racially Diverse

Brokerage firms such as Robinhood Financial LLC, zero-commission trading, the surge in exchange-traded funds and the growth in fractional share ownership have all had a hand in luring a new generation of investors to the stock market in recent years. If anything, the Covid-19 pandemic has accelerated the trends, as evidenced by the unnaturally high prices paid for shares of bankrupt Hertz Global Holdings Inc. or Tesla Inc.’s soaring stock price.

Now comes a new Yahoo Finance Harris poll that reveals other changes in the investing landscape that have far-reaching implications for both the government and companies. For one, more than half the racial gap in individual stock ownership has disappeared essentially overnight. Also, both younger and older Americans are now more likely to own stocks than those in their prime, middle-age asset accumulation years. More than one-third of those middle-aged investors have greatly reduced their stock holdings.

What does it mean? Of course, it could turn out to just be a millennial fad, or a transitory effect of the lockdowns, or even just an outlier survey. But if the results represent a long-term trend they could overturn some long-held assumptions. For one, the political appeal of running an anti-Wall Street platform may not be as effective among young and non-White voters as in the past. And claiming credit for good stock market performance might not matter as much to middle-aged White voters.

Public corporations may find that their individual shareholders are becoming more diverse than their executive ranks and boards. Most of the pressure to date for corporate diversity has come from institutional shareholders. Individual shareholders seldom vote, and while the new, young and non-White shareholders probably don’t represent a significant block of shares, the cultural view of public companies is very much influenced by shareholder characteristics. Companies that can win the loyalty of new investors, especially younger ones, can enjoy relatively cheaper and more secure capital over long periods of time – as evidenced by Tesla.