A recent survey by Bankrate.com showed a side to the US investment markets which many people will be surprised about. When individuals were asked about their preferred investment vehicles in the short and longer term the results were interesting to say the least. The traditional investment strategy tends to be more liquid assets in the short term and less liquid assets in the longer term. So, what was the feedback from this simple insight into investment strategies?
Traditionally cash or near cash investments are seen as short-term investment strategies to ensure that funds are available if required. They also come into play when there are significant shifts in the economy and interest rates and act as a means of hedging investor bets until calm returns to the markets. So, you might be surprised to learn that 23% of those who responded to the survey chose cash as their preferred investment for funds not required for at least 10 years.
This flies in the face of tradition and perhaps illustrates the uncertainty in the minds of many US investors. However, investment advisers will be pulling their hair out at the lost opportunities and income!
It will come as no surprise to learn that real estate was the number one choice for long-term investment vehicles polling 25% of the vote. While we do not have the information to hand, it would be interesting to learn what the figures for real estate and cash were in previous polls. It is highly likely that real estate would have polled significantly more in years gone by and cash significantly less.
When you bear in mind the recent performance of US real estate assets in light of both domestic and international economic challenges, what if some investors were to switch their cash into real estate? There is potentially a significant uplift available to the US real estate market if investors are confident enough in the economy and worldwide stability.
Stock market investments
Stocks and shares came in a disappointing third place with just 16% of the vote which is very surprising bearing in mind the historic US love of the stock market. The fact that the stock market has performed admirably over the last 20 years or so has perhaps pushed some potential investors to the side lines awaiting the often discussed “certain crash”. However, as with the London real estate market this continuous talk of a “certain crash” tends to fall on deaf ears.
Stocks, shares and bonds are often packaged together in the minds of investors although bonds on their own accounted for just 5% of the vote in this poll. When you consider the extremely low level of interest rates around the world it is perhaps no surprise to see bonds lagging in fifth place.
The likes of gold are often seen as something of a safe haven in times of trouble so seeing precious metals in joint third place with 16% of the vote is perhaps no surprise at this moment in time. At some point we will see a switch from so-called precious metals towards real estate and stocks and shares but any uncertainty, brought on by the likes of Brexit and interest rate movements, will ensure that precious metals remain a current option for many.
It is surprising to see longer term cash deposits considered a viable investment for many in the US and such a small margin between real estate and cash investments. However, perhaps this is the worst time to take such a poll with so much uncertainty around the world, interest rates at rock bottom and short-term confusion about economic and investment prospects.
Surely those with a more long-term view will be monitoring US real estate markets extremely closely?