Building wealth is everybody’s financial goal. Some want to build wealth for the amenities and the trophies it provides: nice houses, luxury cars, elegant yachts, pricey clothes, dining extravaganzas, and exotic traveling. Others want to build wealth for financial freedom, independence, and the security wealth offers.
There are several investment vehicles for building wealth these days: real estate, stocks, bonds, gold, and Bitcoin.
Which one is the best? It depends. Investor surveys provide one answer, while market performance numbers provide another.
A recent Gallup survey, for instance, finds that more Americans think that real estate is a better vehicle for building wealth compared to other vehicles for the fifth year in a row. Specifically, over a third of those surveyed thinks real estate beats other investments as wealth building vehicle, while roughly a quarter thinks stocks or mutual funds best serves the said purpose. Gold, cited by 17%, roughly ties “savings accounts or CDs” at 15%, while only a few Americans, 6%, cited bonds (Bitcoin wasn’t included in the survey—see Table 1.
Survey: What American Think About Real Estate, Stocks, Bonds, Gold, And CDs, as Wealth Building Vehicles
But market performance numbers provide a different answer. Real estate is lagging far behind stocks, gold, and Bitcoin in the last twelve months. It also lags behind stocks and Bitcoin over the last five years—See Table 2.
Market Performance of Real Estate, Stocks, Gold, Bonds, Bitcoin
|iShares US Real Estate ETF (IYR)
|SPDR S&P 500 ETF (SPY)
|SPDR Gold Shares (GLD)
|iShares 20+ Year Treasury Bond ETF (TLT)
Source: Finance.yahoo.com 5/11/18
That may come as a surprise to financial experts, as several studies confirm that stocks outperform every other asset category over the long-term.
Still, there are several explanations of the divergence between what investors think about different wealth building investment vehicles and the way these investments have performed. One of them is risk. Investors usually associate stocks with higher risk than other assets like stocks and gold. Another explanation is demographics—the aging of the American population, which makes bonds and CDs more suitable for older investors.
And there’s ignorance and unfamiliarity when it comes to investing in stocks, and especially in new investment vehicles like Bitcoin.