Americans are really wrong about the stock market


One reason more people view real estate as a better investment than stocks, bonds, gold, cryptocurrency, or a bank account is that the value of the average U.S. home has increased by more than 20 % between summer 2021 and 2022.

Stories of people who bought a fixman in a remote town a few years ago and saw their capital skyrocket abound as developers race to find the next under-the-radar town that’s going to get hot.

For the third time in four years, a Bankrate survey found that real estate is what Americans consider the best investment. In a survey of 1,025 adults, 29% said it was the best place to put their money. The stock market was preferred by 26% while cash investments and gold followed with 17% and 9%.

Bonds and cryptocurrency were preferred by 9% and 6% respectively.

“Despite a faltering housing market, the preference for real estate remains high,” Greg McBride, chief financial analyst at Bankrate, said in a statement. “For the third time in the past four years and the sixth time in the past 10 years, real estate is the preferred way for Americans to invest money they haven’t needed in over 10 years. “

Why do many prefer real estate to stocks?

In some ways, confidence in the stock market is improving despite the fact that the S&P 500 is down more than 9% year over year. In 2021, only 16% considered the stock market the best investment.

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But at the same time, the number of people who consider it a good thing to do with their money is still relatively small given its wealth potential.

Those who did not choose it as a top investment named “too much volatility”, being intimidated or not understanding how it works and the belief that it is “rigged against individuals” as reasons why. they prefer other forms of investment.

Baby boomers were particularly likely to fear volatility – 44% of those aged 58-76 cited were likely to fear the stock market compared to just 29% of millennials aged 28-41.

Don’t fear volatility, embrace it

While there’s certainly some truth to the volatility stereotype, much of that fear comes from seeing the stock market as convoluted and real estate as “real.”

In fact, the S&P 500 has grown an average of 14.8% per year between 2012 and 2021. While a 10-year average doesn’t take into account good and bad years, a long-term perspective and a diversified portfolio protect you from the risk of “I’m broke!” losses that come from popular culture and tend to stick as stereotypes.

Over the past few years, most real estate has certainly been a very good investment since the average price of a house has increased by double digits since 2019. But leaving aside the question of the primary residence, buying additional properties as investments comes with volatility – between July 2018 and 2019 the average house price rose only 7.1% while many experts are already warning of a crash that is beginning to follow the windfall seen these last years.

“As a long-term investor, you have to realize that volatility is a feature of the stock market, but if you’re buying stocks in really good companies and holding them for a really long time, think at least five years, but probably longer is how you build wealth,” Daniel Kline, editor of TheStreet, wrote in July.


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