Here's Hoping These Aren't Truly the Most Popular Investments

If something is popular, it doesn't mean it's terrific or should be avoided. A 2023 survey found that Americans' least favorite foods included anchovies, oysters, beets, and blue cheese. Yet each of those edibles has plenty of ardent fans -- and you, too, might be one. Popular items, meanwhile, aren't necessarily great.

It's the same with investments. The most popular ones won't necessarily serve you best. Here's a look at some popular investments, along with some helpful information for each.

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Survey says...

Let's start with a 2024 survey from Gallup that asked: "Which of the following do you think is the best long-term investment -- [bonds, real estate, savings accounts or CDs, stocks or mutual funds, gold (or) cryptocurrency]?" Here are the results:

Source: Gallup.com. Chart by author.

It's worth noting that when you look at the results by income group, they're a bit different. All income groups favor real estate the most, but after that, higher-income respondents favor stocks, while lower-income folks favor gold, followed by savings accounts and CDs. For those with lower incomes, stocks place fourth in popularity.

Which investments do best?

Now let's look at the kinds of investments we should like the most -- and in which circumstances. Check out the table below, which shows the returns of various asset classes between 1802 and 2021, per Wharton Business School Professor Jeremy Siegel:

Source: Stocks for the Long Run , by Jeremy Siegel. Chart by author.

Real estate wasn't included, but I'll get to it soon. Note, though, how superior stocks are to bonds and gold. Stocks have outperformed over shorter periods, too. For example, Siegel found that during the 75 years between 1946 and 2021, stocks grew at an average annual rate of 11.3%, vs. 5.8% for long-term government bonds.

Gold can seem like a smart and safe choice , but per the table above, it's likely not going to make you rich. There have been periods when gold has soared, but there have also been downturns, and you won't be able to time your investments perfectly. That said, if you want to explore investing in gold, there are multiple ways to do so, such as gold stocks and exchange-traded funds (ETFs) that are focused on gold.

Real estate is a mixed bag, with many ways to invest in it. When average people claim that real estate is their favored investment, they're likely thinking of owning actual physical properties, such as their homes. Those types of investments don't have great long-term performance records, though. From 1990 through early 2024, the S&P CoreLogic Case-Shiller U.S. National Home Price index, which measures residential real estate values, rose by 308%. On an average annual basis, that's about 4.2% -- roughly half the corresponding average of 8.1% for stocks over that period.

Sure, owning a home is great and you can (slowly, usually) build equity that way, but you'll likely always want a roof over your head, so you probably won't be cashing in all that value. That said, there are other, more lucrative ways to invest in real estate , such as via real estate investment trusts (REITs) -- companies that own lots of properties and earn income by renting them out. REITs trade like stocks, making it easy to invest a little or a lot and to get in or out quickly.

Timing matters

It's worth keeping in mind that timing matters -- a lot. Savings accounts and certificates of deposit (CDs) are generally quite slow growers, but they're good places to park your short-term dollars -- money you won't need for five or so years.

While it's hard to beat stocks for wealth building, you should only invest in them with long-term money -- dollars you won't need for at least five, if not 10, years. That's because the stock market can be volatile, and you don't want to have to sell after a drop.

Think about which types of assets make sense for you and what kind of asset allocation to shoot for. For stock investing, perhaps consider some solid, strong-performing ETFs .

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