In a recent survey conducted by Bankrate, respondents were asked the simple question: What is your preferred type of investment for money that you won’t need to access for at least 10 years?
The answer is somewhat surprising. Despite the bursting of the housing bubble a decade ago that was a primary cause of the Great Recession, real estate was named as the preferred long-term investment by nearly a third (30%) of the survey respondents. This is the highest ranking for real estate since Bankrate started conducting the annual survey seven years ago.
Stocks Fall in Popularity
Meanwhile, stocks — which were the preferred type of investment when the Bankrate survey was conducted last year — fell to second place. Just 20% of respondents said stocks are their preferred long-term investment vehicle, despite the fact that stocks have averaged about a 10 percent annual return over the long term.
Cash equivalents, such as money market accounts and CDs, came in just behind stocks with 19% of respondents listing cash as their preferred investment for long-term money. Other types of preferred investments mentioned by respondents were gold and precious metals (11%), bonds (7%), and cryptocurrencies such as Bitcoin (4%).
Real Estate is Widely Popular
Real estate was mentioned as the most popular long-term investment by respondents across all generations and income ranges. This includes Millennials, 36% of whom listed real estate as their preferred long-term investment vehicle. In fact, this was the highest percentage that listed real estate among all the different age ranges.
Bankrate’s chief financial analyst put it this way: “Millennials are higher on real estate than any other age group, have cooled a bit on cash, and still aren’t keen on the stock market when investing for more than ten years.”
Younger generations also show a stronger preference than other age groups for choosing cryptocurrencies as a long-term investment. These were mentioned by 9% of Millennials, or three times more than often than they were mentioned by Gen Xers.
Wealthy Respondents Prefer Stocks
The higher their income, the more likely respondents were to list stocks as their preferred long-term investment choice. Twenty-eight percent of respondents earning more than $75,000 a year mentioned stocks, while 29% of those earning between $50,000 and $75,000 a year mentioned stocks.
In comparison, just 15% of those earning between $30,000 and $50,000 a year said stocks are their preferred long-term investment, while just 11% of those earning less than $30,000 a year said they prefer stocks. In fact, lower-income households (22%) were more likely than other income groups to say they prefer cash equivalents for long-term investing.
Impact of Falling Interest Rates
Given the fact that the Federal Reserve recently lowered interest rates for the first time in more than a decade, the survey also asked respondents whether declining rates would affect their investing and borrowing strategies. A little more than half of respondents (58%) said they’d be less likely to invest in cash equivalents due to declining interest rates, while about a third (64%) said they’d be less likely to invest in stocks.
Surprisingly, only about a quarter (26%) of respondents said that declining interest rates would make them more likely to borrow money. “A Fed interest rate cut is unlikely to influence how consumers manage their finances,” concluded the Bankrate chief financial analyst.
What’s Best For You?
So which type of investment is the right choice to help you meet your investing goals? The answer will depend on a number of different factors, including your risk tolerance and time horizon.
We would be happy to help you choose the right investments to meet your goals based on your specific circumstances. Please give us a call if you’d like to schedule a meeting.
