Smart Women Smart Money | Harris & Harris Wealth Management

I read an interesting article on WTOP’s website last week: Wealth gap widens between whites, minorities. The Pew Research center reported that the wealth gaps between whites and minorities have grown to their widest levels in a quarter-century.

The story went on to quote Timothy Sneeding, a professor who specializes in income equality as saying “What’s pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African-Americans who bought homes in the last decade – because that was the American dream – are seeing big declines.”

That got me thinking. Is owning a home truly the American Dream? Is it really an asset?

I believe we, African Americans in particular, invested in real estate because it was something tangible that you could touch and feel. We bought into the idea that a house was the first step toward building wealth. That was why I was determined to purchase my first home by the age of 25. Based on what I knew at the time, owning a home made sense. I was creating my personal wealth.

It also made sense because before 2008, in most areas of the country, real estate appeared to always go up in value.

But according to Sir Isaac Newton, “what goes up, must come down.” Sure enough, the bubble burst, and it has nearly destroyed us and our communities financially.

Now we know why investment professionals always tell us to diversify, diversify, diversify. Diversifying means not having your money (eggs) in one basket, investment type, or asset class, but that’s not the only component to consider. If you want to make your investments grow, you need to also take strategic risks.

The combination of diversification and strategic investment planning go hand and hand. Like Kenny Rogers said, “You have to know when to hold them, know when to fold them. In other words, know when to stand and hold your ground and know when to walk away, even run from an investment.

The big lesson here is that we need to become more engaged in understanding and evaluating the investments in our entire portfolios. Let’s stop compartmentalizing our assets. Maybe then, we can begin to better educate ourselves and take a more holistic view of our assets and close the wealth gap again.