Stocks 'Assets of Choice' for Some Time: Gamco

Small investors have waded back into the surging waters of stock markets, Howard Ward, Gamco Investors CIO for Growth Equities, told CNBC on Tuesday, adding that phenomenon was likely to continue.

The rising interest from individual investors have helped advance the rally, Ward said, helped by the impressive earnings growth of key components in the S&P 500 Index.

"The reason is this: If we're expecting earnings on the S&P this year of around $110, if you put a reasonable average multiple on that at 15 times, you get a 1,650" on the index, he explained during a "Squawk Box" interview.

That represents a seven percent move higher from current levels, and would come on top of the eight percent increase seen already on a year-to-date basis.

"That's a reasonable target for year end," he predicted, adding that the estimate could be considered conservative if 2014 earnings fall in the range of "$115 or $120" range.

(Read More: Rally Not Over, but Stocks No Bargain: Cooperman)

As for the Dow Jones Industrial Average, Ward said that the Dow at 16,000 was "very doable" in the next few years. "Stocks are going to be the asset choice for some time," but there will be corrections along the way, he warned.

While the rally might be enticing to many investors, Ward said in certain respects, buyers should beware.

"Do you have to rush into stocks right now if you've missed the 130 percent move that's happened over the last four years? No you don't," Ward said. Still, stocks represent the best of a number of asset options, he added.

"You might get a better entry point, but you won't make any money in bonds — that's my opinion. You obviously won't be making money in cash." He concluded that stocks are going to be the best way for baby boomers to finance their retirement.

(Read More: What Other Pros Are Saying About the Market's Rally)

He said the real question mark for investors is the Federal Reserve's policy of near zero interest rates and their continuing bond-buying program. Much of that buying has helped inflate the current rally, which is unlikely to end anytime soon.

"Where would interest rates be if the Fed was not buying a trillion dollars of bonds every year," Ward asked. "We don't know the answer to that. How would we be financing our deficit, if not for the Fed? Certainly not at this level of rates."

But even with no Washington debt solution in sight, Ward said, "The economy has more momentum right now, as we enter into the sequester phase than, I think, most people had expected."

(Read More: Defending the Sequester: Why It Might Be Exactly Right)

Pointing to evidence of more strength in housing, autos, and consumer spending overall, he projected economic growth of at least two percent. "I think the surprise could be to the upside," he added.

By CNBC's Matthew J. Belvedere; Follow him on Twitter @Matt_SquawkCNBC