Back in August of 2011, Gallup decided to do what they do best — which is poll the American public for their thoughts. In this instance, it was their thoughts on investing.

The questions asked was simply: What do you think is the best long term investment?

Their answers were very instructive: 34% of Americans said gold is the best long-term investment. Real estate came in second at 19% with stocks at 17% in third, and bonds at 10%.

Of course, the public has the tendency to emphasize what just happened, rather than what is likely to happen. We need to keep that in mind when we look at how well the public has done since then.

Let’s start with the public’s then favorite investment, Gold:  As a reminder, the shiny yellow metal was approaching an all time high of $1900 per ounce, in August 2011, about to embark on a 35% crash, still in progress.

 

Gold (GLD ETF)
GLD

 

How about Equities? They were the 3rd of the 4 investments — how has the public done with that pick? As the chart below shows, not too well. Back in August 2011, the SPX was around 1100. Its since rallied 50% (including the recent sell off since May).

 

S&P500
SPX

 

Note that the S&P500 was not the best performing index — others, notably Russell 2000, have done much better. But since its the benchmark, I chose that chart.  Nice call, Public! (not).

The masses, believe it or not, got their least favorite asset class, Bonds wrong too. Despite the incredible run up in yields this month, bond prices are still above (and yields below) where they were in August 2011.

 

Treasury Bonds (Yield inverse to price)
BND

 

The public did get one things right — Real Estate has been rallying since 2011. It was their second favorite asset class behind gold.  The Vanguard REIT index is up about 30% since then — so they did manage to pick one asset class out of 4 that worked out.

 

Vanguard REIT Index
sc

 

The public has spoken! As a reminder, you might want to avoid following their advice . . .

 

Previously:
Best Investment According to the Public? Gold (May 3rd, 2012)

Source:
Americans Choose Gold as the Best Long-Term Investment
Men, seniors, middle-income Americans, and Republicans are more enamored with gold
by Dennis Jacobe, Chief Economist
http://www.gallup.com/poll/149195/americans-choose-gold-best-long-term-investment.aspx

Category: Cognitive Foibles, Contrary Indicators, Investing, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “Polling the Public About Investing Is Loads of Fun!”

  1. PeterR says:

    It appears that the public has been lookin’ for love in all the wrong places . . .

    Where should they be looking?

    Pull up this page and see where Didier Sornette and BR are both looking:

    http://www.ritholtz.com/blog/2013/06/how-we-can-predict-the-next-financial-crisis/

    “The Big Picture!”

  2. cowboyinthejungle says:

    Point taken, but how confident are you that, had Gallup polled only financial advisors, they would’ve been better prognosticators? Color me skeptical…

  3. BennyProfane says:

    Wow, just wow. The only figure I would love to see here is the correlation of those who actually have any kind of money to “invest” and their favorite investments.
    Why am I hearing so much lately about net worth in America returning to pre crash highs, when real estate is still down almost 30%, and an awful lot of people, according to this survey, have lost a bunch in gold?

  4. Iamthe50percent says:

    Which asset performed best is dependent on your definition of “long term”. 2011-2013 is at best medium term. Long term to most people means decades, 20 years or more. Look at charts for 1993-2013. For young people starting to invest it means their whole working career. That means around fifty years, given current retirement trends. So look at charts for 1963-2013.

    I, for one, would be very interested in seeing those charts.

  5. This is what makes markets. The majority should be necessarily wrong so that the tiny minority makes outsized gains (this is especially true the shorter the investment time frame). However, we should be alert not to fall inadvertently in the majority camp, whereas we think, we belong to the clever minority.

  6. dc20008 says:

    Looking forward to seeing the 50 year charts.

  7. [...] in response to our post on how wrong the public was back in this 2011 Gallup poll, the following suggestion was [...]

  8. NeutralObserver says:

    This is why 401K programs do not work for the general public.

  9. VennData says:

    You’ll all go to hell for bad mouthing gold. Haven’t you watched the commercials?

  10. Livermore Shimervore says:

    rise in real estate prices, as Mr. Shilling pointed out recently on one of those Yahoo Finance segments, RARELY, if ever, include similarly rising total ownership costs when evaluating peformance.

    Property values may be up 12% in the last year…but that probably means it won’t be long before their local taxing authorities ring them up for an assessment/visit. My buddy just had his first such visit since the bubble. His taxes went up 20% on the new appraised value.

    Personally, the rise in ownership costs, and how this extra out-of-pocket money isn’t going towards other family investments, are killing the prospect of well-funded retirments for most Americans and in part accounts for the 2% savings rate. Granted investment class returns aren’t as rosy according to this blog post, but still better than pursuing the typical ‘all eggs in one asset class’ (RE) strategy of your average middle class worker.

  11. Livermore Shimervore says:

    p.s.
    If a bubble has a feature of spending nearly all of its time well above the long-term average, and lookin at that S&P500 chart above, wouldn’t it be fair to say that these stocks have been well above their historical averages for many years now, with only occassional abrupt drops below the average that are deep but short-lived? How long can you keep that up? Or has the explosion of 401K based defined contribution plans pumped an un-ending stream of cash into equities regardless of earnings potential?
    In other words, as long as the average American earns enough to save, their will be ready-made demand for equities. Which Wall Street in turn play all manner of games for their profit, and in return these workers get marginal benefits.