People say sinking money into the housing market is the safest way to shore up cash, but is it?
When it comes to investing, people favor putting their money into the housing market, but it might not be the best way to make more out of your cash.
For the past three years, Americans have favored hiding their cash away in real estate, says new data from financial news website Bankrate. The second most popular way to stash away money to let it grow is through cash investments, followed by the stock market in third.
Men are more likely to put their money towards real estate at 33 percent, compared to 24 percent of women, which makes sense as women still earn less compared to a man’s dollar. Females are more comfortable putting their money towards cash investments such as savings accounts, with 30 percent responding over 17 percent of men.
Guy or gal, it’s true that real estate has been a pretty solid investment as the market has continued to climb since the housing bubble of 2008. It’s now even reached a point where many Americans fear they can’t afford a home.
Putting money into the housing market isn’t the most efficient way to let your money work for you, says economist Mark Hamrick with Bankrate.com. He says the best money can be earned in the stock market.
“We’ve begun to see rising yields on savings accounts,” says Hamrick. “However, the preferences for cash and real estate indicate that too many people are leaving money on the virtual table by failing to be sufficiently exposed to the stock market, where higher long-term returns are found. This is especially the case for younger investors, who are in the best position to weather the inevitable short-term market volatility.”
Millennials are the least likely to put money into the stock market at 13 percent, and baby boomers are the most likely at 22 percent.
Only 17 percent of those surveyed said they preferred the stock market to squirrel away money they wouldn’t need in the next 10 years. Of those, most are older and politically right-leaning.
Republicans and households with annual incomes of $75,000 or more were the only demographic groups to select stocks as their preferred long-term investments.
Isn’t cash king?
Millennials and the Silent Generation do have something in common — they both love cash.
Leading the charts, 30 percent of millennials say that cash investment is the best choice, shortly followed by the Silent Generation at 28 percent.
Generation Xers and baby boomers have much less of an appeal to cash, at 22 and 17 percent respectively.
Regardless of how people feel towards turning cold, hard cash into more cold, hard cash, it’s not the greatest 10-year investment.
Between 2007 and 2016, cash has only yielded an average of .3 percent annual returns, says the Bankrate report. In comparison, stocks have shown an average 8.6 percent return over the same period.
An investment in housing doesn’t stand up well to the stock market either. A study from the London Business School showed an average return of 1.3 percent annually between 1900 and 2011. In the same timeframe, stocks on average performed more than four times better.
Attitude positive towards financial security
Regardless of how Americans choose to invest, they still feel pretty good about their financial well being. Bankrate’s Financial Security Index measures people’s attitudes about their debt, savings, net worth, job security and overall financial situation, and this past month it reached the third highest level it’s ever been at since starting in 2010.
Four of the five components — job security, comfort level with debt, net worth and overall financial situation — have improved from 12 months ago.
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Article last modified on September 6, 2017 Published by Debt.com, LLC . Mobile users may also access the AMP Version: Housing is Still Americans' Favorite Long-Term Investment - AMP.