The Color of Money: An Investment Gap, But No Context

Every reason Hobson listed reflects on the investing acumen of minority investors. However, studies show many companies haven't done the best job of explaining investment options or providing advice to all of their 401(k) participants. Is it so hard to appreciate that many new investors would be leery of investing their money in the stock market, especially of late? And the numerous scandals in the investment community don't exactly engender trust among a group of people who have experienced institutional mistreatment for decades.

What I'm sure Ariel and Hewitt would find if they dug deeper is that class, culture and socioeconomic conditions are determining factors in how much people invest. For example, are the data comparing first-generation minority investors to second- or third-generation middle- or upper-income investors?

First-generation investors may have significantly more debt -- such as student loans -- than second-generation investors, who may have been able to rely on an inheritance or established investment portfolios to fund a college education for their children.

First-generation investors may be more likely to use money they would invest to help extended family members. Could it be that some Hispanic employees may be contributing less to their 401(k) plans because they are sending money to relatives here and abroad?

It's also likely that first-generation investors are spending more than they should on consumer purchases, which isn't unusual for a generation new to better-paying corporate jobs.

And why would African-Americans and Hispanics be borrowing more from their 401(k) plans?

Perhaps they couldn't tap their home's equity for needed cash, as other workers have in the past. We know African-Americans and Hispanics have lower homeownership rates -- for a number of reasons -- so they may have reached for the only large pot of money they had available.

Given those many variables, we ought to be wary of these reports measuring minorities against whites. Without a deeper understanding of what motivates investors, the blanks can't be filled in and companies can't design appropriate marketing or education programs to boost 401(k) participation.

So why is it necessary still to compare minorities with whites?

"It helps to give people a benchmark," Hobson said. "Overall, Americans can do better at saving for retirement, but minorities are much more at risk."

We do need to have conversations about the lower participation rates and find ways to ensure (BEG ITAL)everyone(END ITAL) is saving and investing what they should. But if we are going to continue to compare things in black and white (or brown), we need to provide context. Without it, the information leads -- as it already has in the blogosphere -- to racist invective from people deducing that minorities are just ignorant or spendthrifts or both.