Real-world returns show that, over the long term, stocks generate the highest returns of any asset class. That is not to say, however, that there are periods where stocks underperform other asset classes such as cash, bonds or real estate.
For long-term investors, the majority of your portfolio should be in stocks in order to maximize your returns. Some would argue that the “safety” lower-risk assets such as bonds offer are outweighed by the lower returns they generate. However, assets you will be needing in the next three to five years most definitely should be in “riskless” assets to ensure the money is there when you need it.
AAII Weekly Survey Question
While the data supports stocks as the best long-term asset, that doesn’t always mean investors feel that way.
To see which asset class our readers feel is the best for long-term investors, last week’s survey question asked:
Which of the following do you think is the best long-term investment considering a time horizon of at least 10 years?
In all, 2,408 readers participated.
By an overwhelming majority—91%—our readers believe that stocks, whether individual or stock funds, are the best long-term investment for those considering a time horizon of 10 years or more.
Coming in a distant third, with only 5% of the votes, was real estate.
By nearly a two-to-one margin, gold is seen as the better investment than bonds for those with at least a 10-year time horizon, although they only garnered 2% and 1%, respectively, of the entire vote.
Weekly Special Question
The weekly survey results actually tie into this week’s special question, while I wasn’t expecting them to. Seeing that our readers see stock funds as a better investment in the long-term than individual stocks, I started wondering why. Is it because more of our readers invest in stock funds compared to individual stocks? And if so, why?
The fact that stock funds received a simple majority of votes—51%—while individual stocks garnered 40% of the vote tells me that people do not have confidence in their individual stock-picking abilities or that the best they can hope for is a market return from an index fund. Share your thoughts in the comments section below.
In my 20-plus years working with AAII, I have met countless investors who question their abilities, which is why either they limit their investments to mutual funds or use a financial adviser. While the mission of AAII is to provide investors with the knowledge and resources to become better managers of their own portfolios, many of our readers and members do use an adviser.
However, a recent AARP survey finds 45% of Americans ages 40 to 59 would rather see a dentist than meet with a financial adviser. Which leads us to last week’s special question:
If you have never met with a financial adviser, what are your reasons?
In all, we received 270 responses.
Of those responding, 20% said they do use an adviser or have used one in the past. I wouldn’t say this is representative of our readership, however, given the way the question was worded.
Among the other 80% of respondents that have never met with a financial adviser, more than a third (34%) say they have as much knowledge as a financial adviser or can get similar results by themselves.
Another 21% say they do not use a financial adviser because they don’t feel their best interests are being served.
Rounding out the top three, 15% say they do not use a financial adviser because of the fees they charge.
Here is a sampling of the responses we received as to why our readers have not met with a financial adviser:
- “I feel confident that I can do just as well or better than with a financial adviser.”
- “Not trustworthy, will try to sell me something.”
- “I like to make my own mistakes.”
- “I prefer to avoid the management fees/commissions and do my own reading and research.”
- “I consider my finances to be personal.”
- “Unless you have a big enough portfolio, you are not going to get enough attention for the cost.”
- “Lack of trust that the adviser will give me the best advice for me.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.