Why Most Americans Are Investing in Real Estate, Not Stocks

David McNew/Getty Images

David McNew/Getty Images

If you’ve been hesitant to dip your toe in the water when it comes to investing in stocks, you’re not alone. A recent Bankrate survey found that just 17% of Americans agreed that stocks are the best way to invest money that won’t be needed for at least 10 years. The two most preferred means of investing were cash (23%) and real estate (27%). Men were more likely to choose real estate as their preferred investment method while women were more likely to turn toward the safety of cash investments such as savings accounts and CDs.

Millennials take a more conservative route

The survey also took a look at preferences when divided according to age. Surprisingly, younger respondents chose reduced risk over higher returns, while older respondents were shown to be less risk averse. The results found that millennials have the highest cash preference when compared to all other age groups. Those between the ages of 30 and 49 were more likely to favor real estate investing.

College-educated prefer stocks

Those with more education tend to be drawn to stocks. One group where interest in stock investing remained high was households headed by college-educated individuals. This may be due in part to more knowledge about how stocks work and a deeper understanding of the long-term benefits versus short-term risks.

Additional research findings:

Source: Thinkstock

Source: Thinkstock

  •  Among those who favored stock investing, gold and other precious metals ranked fourth on the list, garnering a 14% vote. Bonds came in last, with a vote of 5%.
  • When survey respondents were asked how they felt about their job security compared to 12 months ago, 22% reported feeling more secure and 14% reported feeling less secure during this time period. These numbers are down from 29% and 9% in June.
  • Consumers are feeling less confident in their ability to save for a rainy day. Roughly 29% of respondents reported being less comfortable with their savings level compared to 12 months ago, while 18% say they are more comfortable.

Why do Americans prefer real estate?

Bankrate says many Americans remain fearful of the stock market’s short-term volatility, and would rather give up higher long-term returns than take the risk. They mention that although the S&P 500 has risen 27% over the past two years, Americans are just three percentage points more likely to turn to stocks now than they were two years ago.

“Most Americans are still not embracing the stock market for long-term investment horizons. Many still fear short-term volatility more than they desire the higher long-term returns,” said Greg McBride, CFA, Bankrate.com’s chief financial analyst.

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