When it comes to investing their money, millennials aren't turning to the stock market.
A new survey from Bankrate asked more than 1,000 Americans what they consider the best way to invest money they won't need for 10 or more years. Real estate was the most popular response, chosen by 31% of respondents.
For young people, that's especially true. Among millennials (those ages 23 to 38), 36% say real estate is the best long-term investment option. Zero-risk cash investments, such as high-yield savings accounts or CDs, came in second with 18% of respondents, while the stock market took third place, with 16% of respondents.
Not only do millennials have the highest preference for real estate of any generation, they're the least likely to put their money into stocks, the survey found.
That may be because millennials favor more concrete investments. "Their preference for real estate underscores the desire many ultimately have for homeownership," McBride says. "The tangible nature of real estate provides more comfort than what may seem more abstract, like stock ownership via mutual funds and ETFs."
However, real estate isn't necessarily the best, or easiest, way to build wealth, especially for those who simply own single-family homes.
While there are plenty of reasons to buy your own home, it's not a replacement for a retirement fund. In fact, "it's usually a terrible investment," Peter Mallouk, a certified financial planner and president of wealth management firm Creative Planning, told CNBC Make It.
Home ownership comes with a host of expenses: "You're paying property taxes, maintenance and insurance," Mallouk says.
And while your home may increase in value over time, it probably won't appreciate enough to offset all of the money you've sunk into it over the years, he explains.
Ramit Sethi, personal finance coach and author of "I Will Teach You to be Rich," agrees. "Generally, we can assume that over the long term, if we invest in a low-cost diversified index fund, we get about 7%" annualized returns, he says. "Can you beat that in your area, over time, with real estate appreciation?"
Despite rises and falls in the market, stocks are generally a reliable long-term investment. The S&P 500 earns an average annual return of about 10%. Adjusted for inflation, that still comes to an annual return of around 7% to 8%.
Plus, investing in the market doesn't have to be complicated. One easy way to get started is by contributing to a tax-advantaged retirement account, such as an employer-sponsored 401(k) plan, Roth IRA or traditional IRA.
Whatever you do, it's important to start saving and investing as much as you can as early as you can. The more time your money has to grow in the market, the better your outcome will be.
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