Each year Gallup performs a survey that asks a group of Americans what the best long-term investment is among the following options:
Stocks
Bonds
Cash
Gold
Real estate
These are the latest results:
Real estate has been at the top of the charts for over a decade at this point but it saw a big drop from 2022 to 2023.
Following the 2022 bear market stocks fell to third place behind gold. Interestingly enough, gold was in the pole position in 2011:
This was a good contrarian indicator if there ever was one since gold peaked the very same month this survey was released. The yellow metal has basically gone nowhere ever since:
With real estate in the top spot will there be a similar comeuppance in the years ahead?
With affordability levels off the charts and the fact that we basically pulled forward a decade’s worth of gains and then some in 3 years, it would make sense.
I don’t know what future house price returns will look like but it’s hard to see massive gains from current levels of prices, mortgage rates and affordability levels.
It does make sense that so many people assume real estate would be the best long-run investment opportunity.
The home ownership rate in this country is higher than the stock ownership rate:
We’re all told from an early age that a house is the biggest investment you can make. Owning a home is a form of forced savings so it also makes sense that it becomes the biggest financial asset for most Americans.
Plus everyone has a parent or relative who bought a house for like $50k in the 1970s or 1980s that is now worth $500k.
Housing is the most personal of all assets since you can’t live in your shares of stocks.
The biggest problem with looking at a house as a financial asset is that it’s also a form of consumption. You have property taxes, insurance, maintenance, remodeling, upkeep, landscaping and all of the other things you have to buy as a homeowner to keep it functional.
There is also leverage involved since most of us cannot afford to buy a house with cash. This typically works in your favor but it’s worth mentioning. It would seem crazy if everyone put 5-20% down on their stock investments and borrowed the rest but that’s exactly what happens with most home purchases.1
The illiquidity involved in the housing can be a pro or con depending on how you look at it.
You can’t spend your house so the inherent illiquidity can be a downside if you need the cash for some other use. But the illiquidity of the housing market is a positive from the standpoint of forcing people to hold a financial asset over the long haul.
You can buy and sell a house in a short period of time but it’s not financially beneficial to do so considering all of the frictions involved in the process (realtor fees, moving costs, closing costs, inspections, etc.).
It is hard to believe stocks never got higher on this list during the 2010s bull market but investors have built a sturdy wall of worry about the stock market ever since the Great Financial Crisis.
I’m not so sure you can use these types of surveys for contrarian indicators like you could in the past. Sure, investors will always chase performance but the timing is always what gets you on these things.
The good news is you don’t have to pick just one asset class to invest in over the long-term. You can own stocks, bonds, cash, gold, real estate or anything else you want in a diversified manner.
And most investors do own a home along with a diversified portfolio of more liquid financial assets.
No one ever forces you to put all of your eggs in one basket like they do in a survey.
I prefer to remain diversified because I have no idea what’s going to happen in the future with any of these asset classes.
Michael and I talked about the best long-term investment and more on this week’s Animal Spirits video:
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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
