The Gallup survey was conducted from April 1 to 14, well into the COVID-19 pandemic and the resulting stock market plunge, so it's not surprising that investors might be hesitant to put their money in the stock market. And it certainly makes sense that more people gravitated toward "safer" assets like savings accounts, gold, and bonds than a year ago.
However, one interesting takeaway is that not only did real estate get the most responses for the eighth consecutive year, but the gap between the percentages of Americans who prefer real estate and stocks has never been wider.
Why might Americans favor real estate over stocks?
Given the unprecedented volatility in the stock market, there are some good reasons why Americans might be more attracted to investing in real estate:
There aren't any recession-proof investments that are capable of strong long-term returns, but some are more resistant to the effects of recessions than others. Real estate tends to hold up better from both a market value and income perspective during tough times than stocks.
Its illiquid nature
Generally speaking, liquidity is considered to be one of the negative factors of real estate versus stocks. In other words, one of the benefits of investing in stocks is that you can buy or sell them whenever you want with the simple click of a mouse. On the other hand, in turbulent times, the illiquid nature of real estate can be a benefit. If you own a rental house, for example, you aren't going to watch its market value rise and fall as your stock portfolio does. In short, the lack of liquidity and clear movements in market value can help real estate investors rest easy during tough times.
Stable and passive income
Real estate investments are designed to produce steady income streams that increase over time. Assuming you aren't managing rental properties yourself, they are also very passive in nature.
When it comes to tax advantages, real estate is far superior to stocks, especially for investments outside of retirement accounts. Real estate investors can use depreciation to reduce their taxable rental income, and strategies like 1031 exchanges can allow investors to defer capital gains tax indefinitely on their rental properties.
The Millionacres bottom line
Here at Millionacres, we're obviously a little biased when it comes to the best long-term investment type. However, the fact is that there are some characteristics of real estate investing that make it a preferable choice for long-term investors, especially during turbulent economic times.