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Americans' Faith in Stocks as Best Investment Partly Restored

Americans' Faith in Stocks as Best Investment Partly Restored

PRINCETON, NJ -- As Congress attempts to impose stiffer regulations on Wall Street to prevent a repeat of the 2008 financial crisis, Americans express a greater preference for stocks or mutual funds as the best long-term financial investment than they did a year ago. Still, real estate and savings accounts/CDs continue to edge out stocks as the perceived best investment.

2002-2010 Trend: Perceived Best Long-Term Investment

The 22% of Americans who now say stocks or mutual funds constitute the best long-term investment is up from 15% a year ago, when the stock market was also much lower. It is similar to the 23% seen in September 2008 -- just prior to stock values tumbling amid the unfolding financial crisis. However, it remains a bit lower than in April 2008, and is significantly lower than in 2007.

The close connection between perceptions of stocks as the best investment and the performance of the stock market is clear in the accompanying graph.

Perceptions of Stocks/Mutual Funds as Best Investment vs. Dow Jones Industrial Average

Real estate, at 50%, was the clear favorite in Gallup's first measurement, taken in July 2002. At that time, the stock market was still ratcheting down after the bursting of the Internet dot-com bubble in 2000. But as surging home prices in the first half of the decade gave way to signs of a burst in the housing bubble by 2007, the preference for real estate fell and that for stocks swelled to 31% -- the highest seen this decade.

Upper-income and college-educated Americans tend to prefer stocks and mutual funds, while Americans with lower incomes and those with no college education favor savings accounts or CDs as the best investment.

Perceived Best Long-Term Investment -- by Income and Education

Bottom Line

Despite the well-worn adage "buy low, sell high," Americans' belief about whether the stock market is the best long-term investment tends to follow price trends. It is certainly understandable that Americans' confidence in equities was shaken last year, given the market weaknesses revealed in 2008 and 2009. But with the Dow Jones Industrial Average surpassing 11,000 in recent days, and perhaps given the government's promise of greater oversight, that confidence appears to be rebounding. Notably, the majority of middle- and upper-income Americans favor giving the federal government new powers to regulate "Wall Street banks and financial institutions."

Do You Favor or Oppose Congress Passing a Law That Would Give the Federal Government New Powers to Regulate Wall Street Banks and Wall Street Financial Instituitions? By Annual Income

Survey Methods

Results are based on telephone interviews with 1,020 national adults, aged 18 and older, conducted April 8-11, 2010. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Interviews are conducted with respondents on landline telephones (for respondents with a landline telephone) and cellular phones (for respondents who are cell phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

Which of the Following Do You Think Is the Best Long-Term Investment -- Bonds, Real Estate, Savings Accounts or CDs, or Stocks or Mutual Funds?

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