Individual investing—whether contributing to a managed fund in a 401(k) or selecting stocks and bonds—is one of the primary ways to grow long-term wealth in the United States. Yet it’s a financial practice that can feel exclusionary for women, especially Black and Latinx women earning low and moderate incomes (LMI), even as they express a real desire to do it.
“I always thought you had to be a white, cis male with lots of money to invest. It was just my misconception… I never heard anyone in my family talk about investing. I didn’t even know that’s what my 401(k) was doing.”
Iesha, single mom and first-time investor, Transforming Investor Identity Project
With support from the Nasdaq Foundation’s New Investor Initiative, Commonwealth seeks to make investing inclusive to all and facilitate an industry-wide shift with our groundbreaking research in the Transforming Investor Identity Project. Until now this specific aspect of investing—how individual identification as an investor forms—has been largely unstudied. In prior research supported by Nasdaq, we identified the four primary barriers to inclusive investing: resources, actionable knowledge, market access, and investor identity.
The Transforming Investor Identity Project follows more than 800 first-time investors as they explore, learn, and invest on one of three fintech platforms—Ellevest, Public, and Stash—over 12 months. Each participant started with $150 in seed funding as a low-risk way to experiment without using their own money. Through Commonwealth’s regular surveys and analysis, the research is revealing how, why, and when the mental switch to call oneself an “investor” is flipped for these new entrants into capital markets and how this shift affects their investing behavior.
Early insights
In our first research publication for the project, Transforming Investor Identity, published in October 2023, early findings reveal critical insights that we’ll build upon as the research continues through 2024. Early insights include:
- Investor identity—or a sense of belonging—is something that can be developed rapidly under the right conditions. Critically, helping people overcome psychological barriers rooted in the idea that investing is difficult or that there is a huge amount one needs to know before one can get started is an important component of a more inclusive investing system. After just a few months of experience, 63% of participants agreed with the statement that “before I started investing, I thought it would be more difficult than it actually is.” For providers, this highlights the importance of giving first-time investors the tools and opportunities to try investing in ways that overcome anxiety around the unknown.
- The use of the on-platform education tools—ranging from educational articles to videos—is closely connected to a sense of belonging. Four in 10 participants reported that they feel like they belong in the investing community, and of those, 67% cited “learning more about how to invest” as having a significant impact on this sense of belonging. For providers, ensuring that on-platform educational tools are easily available, appropriately designed, and streamlined into the onboarding process may be an important way for platforms to cultivate investor identity early in the customer journey.
- There is ample room for providers to integrate more learning as a way to nurture identity formation. The data showed that of the 51% of the participants who engaged with free on-platform learning tools, the majority (81%) found them useful. Understanding how learning tools and pathways can be even more effectively incorporated into the onboarding process may be an important opportunity to increase a sense of belonging for new investors early on in their journey. It may also encourage further learning and investment rather than disengagement.
Why is identity so vital?
Identity and a sense of belonging are more difficult to understand than barriers like resources and knowledge, which have more distinct contours. Designing for a sense of belonging, however, could make the difference in attracting LMI women who are ready to invest and is currently under-examined by practitioners. Comprehending the fundamentals of how to cultivate identity through design is a key part of building a more inclusive investing system.
Overall, the Transforming Investor Identity Project will identify many key factors in design, experience, resourcing, education, and learning that are critical for providers to harness to nurture this identity formation. Our goal is to further understand how investor identity forms and how investment platforms can apply the findings to create a more inclusive experience that effectively allows women earning LMI to feel like investing is for them.
In the coming year, we will publish additional research and a toolkit designed for providers to facilitate rapid adoption of the research. Please subscribe to Commonwealth’s newsletter and follow us on LinkedIn to stay current with all the research in this project.
If you are interested in learning more about this work or would like to work with Commonwealth to build a more inclusive investing system, reach out to us at info@buildcommonwealth.org.
The Transforming Investor Identity Project is made possible by a grant from the Nasdaq Foundation.
About the Nasdaq Foundation
Driven by Nasdaq’s Purpose to advance economic progress for all, the Nasdaq Foundation works with organizations that promote and support under-resourced communities by reimagining investor engagement and equipping communities with the financial knowledge needed to share in the wealth that markets create. To learn more, please visit www.nasdaq.com/nasdaq-foundation.
This report was made possible by a grant from the Nasdaq Foundation.
About Ellevest
Ellevest is an investing and wealth management company built by women, for women that provides a holistic, modern approach to investing. As the experts in building and managing women’s wealth, Ellevest’s offerings include digital investing, financial planning, impact investing, and retirement planning, as well as private wealth management for high net worth individuals. Founded in 2014 by Sallie Krawcheck and Dr. Sylvia Kwan, Ellevest has $1.6 billion in assets under management, and was named Best Mission-Oriented Investing Service by Bankrate.
About Public
Public is an investing platform where members can build a portfolio of stocks, Treasuries, ETFs, crypto, and alternative assets—all in one place. With AI-powered deep fundamental data and custom analysis, Public delivers the context its members need to make better investment decisions. Public is committed to creating a more transparent investing experience that is consistently aligned with its members’ best interests. Serving millions of investors in the US and UK, Public has offices in New York City, London, and Copenhagen.
About Stash
Stash is an investing app dedicated to empowering people to invest and build better lives. Stash’s plans—starting at just $3 a month—unlock access to a suite of simple, automated solutions designed to help people find security and peace of mind through investing. Stash Banking services provided by Stride Bank, N.A., Member FDIC.