America's Favorite Investment

Last summer, Gallup ran a poll asking Americans what they thought would make the best long-term investment. The results:

  • 34% said gold.
  • 19% said real estate.
  • 17% said stocks
  • 14% said savings accounts
  • 10% said bonds

This was telling, I wrote. There are only a few ironclad rules of investing. One is that there's a negative correlation between sentiment and future returns. When the public expects outsize returns, they practically guarantee otherwise. When people won't touch an asset because they think it's toxic, the stage is set for outperformance.

So I issued a challenge:

Can anyone think of a time when an asset the general public was most bullish (or bearish) on performed the best (or worst) over the subsequent 10 or 15 years? I can't. If one exists, share it in the comment section below. If not, think long and hard about how you feel about stocks and gold.

One year doesn't a trend make, nor is it "long-term," but since that survey was taken, gold has dropped about 1%, while the S&P 500 (INDEX: ^GSPC  ) is up 14%.

Anyways, Gallup ran the same poll last week, asking Americans what they think will make the best long-term investment. Drumroll, please…

  • 28% said gold.
  • 20% said real estate.
  • 19% said stocks
  • 19% said savings accounts.
  • 8% said bonds.

Somewhat different from last summer, but gold still takes the cake.

Another interesting point: The fact that Americans are as bullish on savings accounts that yield nothing as they are on stocks that yield 3% and can grow earnings along with inflation is telling. History has a habit of humbling those kinds of outlooks.

What do you think?

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.             


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  • Report this Comment On May 03, 2012, at 3:07 PM, DividendsBoom wrote:

    The key word is long term, and the fact that less than 20 percent of the population picked stocks is sad. I'd take gold over a savings account, but over stocks? Silly.

    Furthermore, I didn't know savings accounts could make a list of long term investments. Learn something new everyday.

  • Report this Comment On May 03, 2012, at 5:12 PM, glassbd86 wrote:

    You know stocks are coming back when you see news articles on "The Death of Equities" or something similar.

  • Report this Comment On May 03, 2012, at 5:17 PM, markodavid wrote:

    Stocks are an image of value.The substance is currency worth.The worth of all the money in the every western nation is an illusion.Gold is the one currency of merit.If you don't agree ask yourself 1 ?.Why is gold replacing the USD$ as the oil trading medium of choice?Answer,because it can.t be pumped up/printed.The world economy will be run on gold again in less than 3 years.

  • Report this Comment On May 03, 2012, at 5:19 PM, pkpdjh wrote:

    Gold? Stocks? How 'bout gold stocks?

    Even if gold stays roughly where it is, the gold stocks will post good earnings. I don't see how GLD and GDX can be this far apart forever.

    http://finance.yahoo.com/echarts?s=GDX+Interactive#symbol=gd...

  • Report this Comment On May 03, 2012, at 5:20 PM, akutach wrote:

    And the other 6% of people said what?

    I'd like to see the list for what people think is the worst investment? Misconstruing the contrarian logic, one might think this suggests that bonds will turn out to the best, but this only says that the fewest think bonds are the best.

    Alan

  • Report this Comment On May 03, 2012, at 5:25 PM, Idahosehead wrote:

    Savings Accounts! Really?

  • Report this Comment On May 03, 2012, at 5:27 PM, dondysert wrote:

    American's as a whole are totally uneducated when it comes to the investing, and especially investing in the stockmarket.

  • Report this Comment On May 03, 2012, at 5:31 PM, mountain8 wrote:

    Beanie Babies

  • Report this Comment On May 03, 2012, at 5:40 PM, CER4040 wrote:

    What percent are hiding it inside their mattress? Well I suppose a bank account pays about the same return as a mattress and if you have bed bugs those can be considered the hidden fees or fleas lol.

  • Report this Comment On May 03, 2012, at 5:46 PM, veritasvincit wrote:

    I'm assuming Gallup's question was phrased to suggest what a good long-term investment would be 'starting now'. Heck, gold would have been a great investment...if purchased in 2008 at $700/oz.

    I wonder where these respondents would have listed real estate if polled in 2007....

    Morgan, I agree, and think that the past few years have created an extraordinary opportunity for true investors to purchase specific equities at substantial discounts, with limited downside risk, access to dividends and asset growth if one can be patient.

  • Report this Comment On May 03, 2012, at 6:11 PM, SwiperFox wrote:

    I assume that the majority of responders did not currently invest in anything. That leaves their "impressions" of what a good investment would look like. Since they don't understand equities, bonds or the like, gold will win. They do understand gold.

    Plus, we're all bombarded each day with "buy gold now!" ads. I can't remember any radio ads for brokerage accounts.

  • Report this Comment On May 03, 2012, at 6:15 PM, jm7700229 wrote:

    I'd be interested in learning the basis for creating the sample. The most important facet of published statistics is that the samples are universally flawed. The second most important facet is that the statistics are misinterpreted.

  • Report this Comment On May 03, 2012, at 6:22 PM, JayWright wrote:

    I agree with DONDYSERT. The first thing that came to mind was, "How many of the people interviewed know the INS and OUTS of stocks, gold, real estate, or bonds?"

    You just can't walk up to the average citizen and ask that question. This would have more merit if they asked financial experts, CEO's, business professors, etc.

  • Report this Comment On May 03, 2012, at 6:32 PM, MrsCathyGF wrote:

    I think there are some good reasons why only 19% recognize the power of investing in the most dynamic economy known to man. They are too busy doing the work. They are too busy with managing the many moving parts in life. Thats ok. They can hassle the 1% while the 19% breezes on by...

  • Report this Comment On May 03, 2012, at 6:38 PM, maniladad wrote:

    Perhaps you're forgetting "the largest investment most people ever make", their home. For at least since the mid 1950's, when I was old enough to pay attention to such things, the primary, usually sole, financial goal of most Americans has been to own their own home. And for most of that time that has been a good option, considering all the benefits, such as building equity instead of paying rent, tax deductions for interest costs, and a fair amount of appreciation, usually keeping up with inflation. The primary advantage of home ownership is that it is a forced savings plan, because the mortgage is there to be paid every month, without any need for discipline. Unfortunately, at no fault of their own for most people that goal may be less accessible than it was in the past and less than it should be.

  • Report this Comment On May 03, 2012, at 6:40 PM, lovesaves wrote:

    The only reason gold isn't providing the biggest returns today is because the U.S. government depresses the price by continually selling off its gold holdings that were accumulated decades ago.

  • Report this Comment On May 03, 2012, at 7:02 PM, WikiCPA wrote:

    So what you're saying is....short gold? I may just do some due diligence. I believe it was buffet who said something along the lines of 'when the crowd is fearful, be greedy, and when they are greedy, be fearful'.

  • Report this Comment On May 03, 2012, at 7:11 PM, WOODNEYE wrote:

    If the poll had asked the same people to rate themselves on using these different investment vehicles you'd have a better understanding of where their answers were derived from. I doubt that a majority of them even had actual investments of even 10 percent of their yearly incomes.

  • Report this Comment On May 03, 2012, at 8:38 PM, drsto wrote:

    When you talk of buying gold are you talking gold bars? or what about all these gold coins they advertise? Is rental property a good investment? I have a house that has a positive cash flow, but if it goes emplty it's a drain. I thought of just getting rid of it and buying a condo cash so I would only have the HOA of $350/month. At 57 I hoped to get my Social security, and my IRA payments. I am so confused. Finance manager started out good but at 1.5%, I have not made anything this year. Any advise? What about Fidelity?

  • Report this Comment On May 03, 2012, at 8:53 PM, luckyagain wrote:

    My 2 cents worth: people have been watching too much Fox TV and therefor beleive that gold is a good investment. Maybe 5 or 10% of investment should be gold/silver but it is normally a terrible investment. People understand gold and therefor it resonates with their feelings and fears. I would guess that a fair market value of gold is between $350 and $700 per ounce. Anything above that is a speculative bubble. All of these arguments about gold/silver being a currency is totally silly. The real and true value of gold at this moment of time in about $1600/ounce. What it will be next year or 10 years from now is unknown and unknowable. Most buying gold seems to forget that someone else is selling it. All of the gold mining companies are not keep it but sell it on the open market as soon as they can. What does that tell you?

  • Report this Comment On May 03, 2012, at 10:36 PM, mj2boogie wrote:

    Another 2 cents worth: "Most buying gold seems to forget that someone else is selling it." True enough. Of course, that applies (generally) to stocks as well - Those buying stocks are buying from someone selling stocks...

    With regard to the polls, I think it is unfortunate that so many put much of their savings in gold. They will be disappointed long-term. Real estate is a good investment in a well managed REIT, but not so much in a house you buy. For me, stocks are certainly the best investment (of course, that could be in gold, commodities, real estate, or any other business you can think of, and I assume that the poll would put ETFs and Mutual Funds in the "stock" category). Savings accounts are very low risk. The return is commensurate with taking little if any risk. Bonds offer good returns also, though not as good as stocks over time.

    It seems to me that part of the problem here is that the question is poorly worded. It doesn't define 'best'. It fails to take into account the risk vs. reward involved in any "investment".

    Mark

  • Report this Comment On May 03, 2012, at 10:43 PM, Idigmoney wrote:

    Two things especially interest me here: first, the stock market has been doing quite well for the last two years in spite of the lack of confidence the non-institutional investor exhibits; he will probably catch on eventually (too late?) and drive the market even higher

    Also, we should remember that gold, like currency, primarilly has the value given it by those who have faith in it. Its practical value alone would certainly value it at a far lower price than the belief in the value of gold currently does. If people can lose faith in American business (i.e. stocks), will they forever maintain their lofty opinion of shiny metal?

  • Report this Comment On May 03, 2012, at 11:59 PM, MichaelDSimms wrote:

    I guess investing in an education wasn't an option.

  • Report this Comment On May 04, 2012, at 1:02 AM, The1MAGE wrote:

    Tulips?

    Polls will give an idea of how people are thinking, but not sure how that helps me invest.

    Gold is a bubble, and while I don't think is is going to pop real soon, it will eventually.

    I have a savings account, but it is just to hold money for something else. It is not an investment to me.

    Stocks, a good core for any investor. They go up, and they go down. But if you invest intelligently, then this isn't an issue long term. In fact these events can be taken advantage of to increase returns. (Buffet buys every time the market drops.)

    Yet I have to say Real Estate takes the top for me. But it is much harder then this other stuff. Do it wrong, it can be the worst of the choices. But done right, it can blow away the returns of pretty much anything.

    Throw in the fact that you can find property below value regardless of what the market is doing, you can spend time and money increasing the value of it. You can depreciate it on your taxes, and when you sell it, if done right, (such as 403b,) you can roll it over into another investment, and defer the taxes.

    The only problem is that I don't think this type of investing fits a lot of people. So while I think it can be the best, in the wrong hands it can be the worst.

  • Report this Comment On May 04, 2012, at 1:17 AM, Rowants wrote:

    Ammunition

  • Report this Comment On May 04, 2012, at 1:25 AM, TempoAllegro wrote:

    I wonder what the poll would have said a longer time ago, say five years? Would gold have been so popular then? With governments printing money so much lately, that may explain some of its popularity. Then add it demand from Asia and it does not take a fool to buy it at a more expensive price later, just someone with more money than you, and it seems there will be more and more of those around soon enough.

    Also, do you think the same ironclad logic applies to what the smart money is doing? If all the hedge funds in the world buy Apple, is it time to sell? If not, why do we fear such "average Joe" information to the point of wanting to become contrarian, but not so with smart money info?

    While I like stocks as the best long term investment, most people in the country are struggling so much that "long term" to them means making it to the next paycheck, in which case a savings account sounds pretty good, actually.

  • Report this Comment On May 04, 2012, at 1:44 AM, TempoAllegro wrote:

    Seems my comments were lost so I will try again –

    I wonder how the poll would have looked for gold 5 years ago? With governments printing money so much and demand from Asia steady, it does not take a fool to buy your gold later at a higher price. I imagine it would be an Asian person from a country with a more disciplined government who simply has more money than you. There will be more and more of those people soon enough.

    I am not so sure I trust the pros on Wall Street more than the average Joe on Main Street. But if the contrarian hairs on your neck are raised by reading those poll numbers on Joe then why doesn’t that ironclad logic apply when finding out so many hedge funds own Apple? I would say we are snobbishly contrarian, eschewing news of people we view as lesser than us, and using confirmation bias to the max when the news happens to be about people who either graduated from or work for famous institutions.

    Personally, stocks are my favorite choice for long-term investment. But that is mostly because they are much more convenient and understandable to me than the other investments listed. I think most people today are struggling to one degree or another financially, and for many their time horizon is the next paycheck. Under those terms, a savings account looks pretty good, actually.

  • Report this Comment On May 04, 2012, at 2:09 AM, peterepeat wrote:

    Not everyone can weather the storm of a downturn. Some people cannot afford for their account to lose value before regaining. Depends on the period of time, but you can't know that beforehand.

  • Report this Comment On May 04, 2012, at 5:37 AM, kyleleeh wrote:

    <<?.Why is gold replacing the USD$ as the oil trading medium of choice?Answer,because it can.t be pumped up/printed.The world economy will be run on gold again in less than 3 years.>>

    The same thing was being said in 1979-1980...how did gold investors do over the next few years after that?

    But wait...this time it's different right?

  • Report this Comment On May 04, 2012, at 8:41 AM, bobbyk1 wrote:

    Met a girl the other day and she asked how to invest in stocks.I told her to invest in companies of products you like.She had a AAPL phone,a COH bag and was drinking a SBUX latte.Good start.

  • Report this Comment On May 04, 2012, at 8:45 AM, TMFGortok wrote:

    Gold is *not* an investment. It's a hedge against inflation. 'Investing' in commodities is much like investing in Gold: You do it because you know that when the stuff hits the fan, that's where everyone will be.

    If you think the dollar's value is hunky-dory, then don't put any of your wealth into gold.

    I mean, the dollar is doing great, right? Only 3% inflation this year? It's only lost 95% of its value since the inception of the Federal Reserve?

    Yea. It's an awesome thing to own, that dollar.

  • Report this Comment On May 04, 2012, at 9:14 AM, IdiotProof101 wrote:

    I question the hypothesis that asking a bunch of people who are not active investors is a good contrarian indication of how the investments will perform, as *most* of the people polled do not figure int he balance of supply and demand for these investments. If the survey included a couple of questions like "Do you direct the investment of your savings and retirement funds?" and the results of the best investment question were filtered to exclude those who answered the first question negatively, then there might be some useful information about the mentality of the part of the herd that matters. But by including a bunch of people who consider a savings account an investment, we know that the data are biased by inconsequential actors.

  • Report this Comment On May 04, 2012, at 9:18 AM, IdiotProof101 wrote:

    @TMFGortok - to the extent that gold prices have demonstrated many periods in which they "outperform" inflation, I'd suggest that gold can be as much considered an investment as a hedge against inflation.

  • Report this Comment On May 04, 2012, at 9:27 AM, Gorm wrote:

    Maybe consumers are smarter than we give them credit. Maybe they understand that a good share of the world is in dire financial shape, ie Europe, Japan, US, China. There is NO magic pill. ALL are fiat currencies.

    Combining dysfunctional leadership amassing debt, economies driven by consumption, housing values falling, consumers mired in debt, questioning economic stability, certainty, they just might see GOLD as that safe haven.

    Gorm

  • Report this Comment On May 04, 2012, at 9:29 AM, BradfordP wrote:

    Most people don't understand stocks or bonds. they do understand savings accounts and real estate and think they understand gold and that skews the results. I'd be curious to see the results of a poll where answers are screened for past/present stock/bond owners from the general public who have never owned stocks and/or bonds.

  • Report this Comment On May 04, 2012, at 11:20 AM, lftrogg wrote:

    Best investments? Sugar, salt, fat, and wheat.

  • Report this Comment On May 04, 2012, at 1:37 PM, ServusDei7 wrote:

    The single best investment is in your own career.

  • Report this Comment On May 04, 2012, at 2:26 PM, DokGonzo wrote:

    I'm going with baseball cards :)

  • Report this Comment On May 04, 2012, at 2:49 PM, lctycoon wrote:

    What kind of real estate? Are we talking commercial, residential, hospitals, apartments, houses, shopping malls? That could be a good investment if rented to someone else to generate cash flows. But primary family residences? How? It would require a steady stream of new buyers to push prices up. And what we've got now is Baby Boomers already owning homes. They would need to sell to the younger generation (millenials, mostly). So... somehow, a generation that is buried in student loan debts and has bleak job prospects and delaying family creation is going to buy lots of houses from a generation that is underwater on their mortgages WHEN interest rates have nowhere to go but up? I bet that it would be a better investment to buy stocks in a company that sells Arizona ocean-front property to mentally deranged chimpanzees! Now, a well-managed REIT on the other hand, yeah, that can deliver good returns.

  • Report this Comment On May 04, 2012, at 9:59 PM, steamoil wrote:

    I will share my experiences of owning stocks, real estate, and precious metals. Back in the 80's I bought some of the new tech stocks in Seagate, Micron, Microsoft,, afew oil companies Flour Corp, Wheelabrator, and others. I also bought a small commercial building to operate my mechanical contracting business from, and a large 3family house to provide a residence for my family and have rental income from the other living units.I bought the house for 65k , put 100k in upgrades, and was appraised for 890k in 2007, when my ex-wife and I bought each other out. The small building was appraised at the same time for 640k. The prices I paid for the stocks were dirt cheap since they were start up companies .,Fluorwas priced at around $9a share. This is all to show the power of owning stocks and real estate for the long term . I still own the building ,a nd I collect rent . Unfortunately I had to sell the stocks to generate capital for business purposes after the '87 crash. But it just goes to show , that those tech companies ,along with many others did well through the years .Buy good stuff and keep it . Buy precious metals like gold silver and at least 5 tons of copper ingots. Copper is the non-precious precious metal.If you buy it now at $3.30, or whatever you can buy it for, keep hoarding it , so that when it goes past $ 4.00 or more per pound you've made a tidy little sum. My only regret after all this time is that I had to sell Fluor Corp , and it rose dramatically a shot time after . Look where it is today. This is all valid proof that owning stocks in good companies and keeping them, will make you wealthy.

  • Report this Comment On May 05, 2012, at 1:48 AM, kyleleeh wrote:

    <<Maybe consumers are smarter than we give them credit. Maybe they understand that a good share of the world is in dire financial shape, ie Europe, Japan, US, China. There is NO magic pill. ALL are fiat currencies.

    Combining dysfunctional leadership amassing debt, economies driven by consumption, housing values falling, consumers mired in debt, questioning economic stability, certainty, they just might see GOLD as that safe haven.>>

    That is precisely why gold probably will not do well over the next 5-10 years...because everything mentioned above is old news and has already been priced in. The time to buy gold is when we have stable geopolitics, tame inflation, strong economies, and cash is king (like the 90s). Why? because the price of gold will have almost no financial Armageddon premium priced into it. By the time you hear mainstream media touting any type of investment the party is already over. I would want to be seller of gold in this economy because there is not much more bad news that is "news" anymore...we know things are bad, it's been priced in already. Smart investing is getting in front of future trends, not chasing current ones.

    I learned this lesson in my 20s when the dotcom bubble burst and was shocked to see the same people rush to do it again with real estate. I don't know what to say when those same people are now doing it with gold after having been twice burned. They say "fool me once shame on you. Fool me twice shame on me." I don't know a saying for fool me three times but we may have to come up with one for all the dotcom-housing-goldbug lemmings.

  • Report this Comment On May 05, 2012, at 7:55 PM, 430CI wrote:

    tobaco stock MO PM have done well .In drips over 10 years. Other stock investments have been A hit or miss I do enjoy the big casino.

  • Report this Comment On May 05, 2012, at 11:28 PM, CoreAndExplore wrote:

    @kahunacfa What??? This is a direct quote from you: "My Venture Capital investment performance has exceeded 40% compounded from 1977-present. <b>My last Venture Capital Portfolio earned an annualized compound rate of return <Audited> of 58.4%."

    You can't be serious about your supposed investment performance. If you had put just $1 in such a portfolio in 1977, and factored in a quarterly compounding rate, you would have over $623,000 today. Say you had put a more reasonable $10,000 down and you'd have $6.23 billion today. Considering the fact that you pronounce to the world that you possess a CFA charter with your username (contrary to CFA code of conduct btw) and that you're typing comments on a MotleyFool article, I'm guessing you're not as wealthy as George Soros, despite your claims.

  • Report this Comment On May 06, 2012, at 9:01 PM, Chicken01 wrote:

    Does anyone have an opinion about Synacor ticker symbol SYNC?

    Thanks

  • Report this Comment On May 07, 2012, at 9:44 AM, mikecart1 wrote:

    The greatest investment is time. Invest in your time wisely and you will have more money than you could possibly know what to do with.

    :D

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