For the third year in a row, the consumer's top long-term investment is real estate, according to a Bankrate national survey. No-risk cash investments are a close second — also for the third straight year — while stocks are relatively unloved, in third place.
Consumers' Top Long-Term Investment Choice
“If you have a long time horizon, you will win in real estate,” says Abhi Golhar, a 32-year-old Atlanta-based real estate investor who owns and rents out single-family homes.
After bottoming out at the end of 2011 following the worst housing collapse in generations, home prices have gone gangbusters recently, climbing back above their record pre-crisis levels. Prices jumped 6.6 percent during the 12 months that ended in May, according to CoreLogic.
Toss in persistently low interest rates, tax goodies that come with owning a mortgage, and the psychological payoff from planting your roots, and maybe it’s no wonder real estate remains popular.
Young vs. Old
The millennial money mind turns out to be a bit more complicated than conventional wisdom might have you believe.
“Contrary to the notion that millennials don’t want to buy homes, their preference for real estate as a long-term investment is exceeded only by their counterparts in Gen X,” says Greg McBride, CFA, Bankrate chief financial analyst.
Young adults split their vote evenly between real estate and cash (at 30 percent for each), with stocks trailing far behind (at 13 percent, behind gold). Compare that to baby boomers, who choose stocks second after real estate, with cash third.
Millennials have years to earn and invest, so why would they seem more eager to play it safe than people who are in or near retirement? Here’s one possible reason: their relative lack of overall wealth compared to their parents and grandparents.
With fewer dollars to play with, millennials are less likely to want to take on risk, even if that means settling for weaker returns.