What’s the Most Popular Investment? These Investors Might Be Missing Out

Retail investors are heavily invested in financial services, technology and energy stocks, but the most popular investment, according to a recent survey, can be a missed opportunity.

The asset the most American retail investors hold onto is cash, according to a survey of 10,000 retail investors released recently by eToro. About 76% of American retail investors hold cash assets, well ahead of the 49% of respondents holding domestically listed stocks and nearly double the 40% of respondents holding domestic bonds.

More investors may be “leaning into cash assets for a solid risk-free return” because interest rates have been so high for so long, eToro U.S. investment analyst Bret Kenwell said in a statement. High interest rates present opportunities in safe investments like high-yield savings accounts, certificate of deposit (CD) accounts or Treasury bills, which have been offering yields above 5%. But, depending on a person’s needs, investors holding onto more cash could be missing out.

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Even the high rates you can currently earn in the various types of savings accounts or fixed income investments cannot compare to the more than 16% gain on the S&P 500 index year-to-date in 2024, not including dividends, which investors can gain access to through low-cost exchange-traded funds (ETFs). This has been an especially strong year so far, but even historically, the stock market has an average annual return of about 10%.

So while people have been playing it safe and getting decent returns in cash in recent times (hopefully, if they’re using tools like CDs and high-yield savings accounts, rather than just parking it in a checking account), they could have been getting even bigger returns in the stock market. Plus, it doesn’t take active day trading or smart stock picks to succeed: You could easily use ETFs to see big returns, and you don’t need a lot of extra money to begin investing.

If you’re trying to figure out how much cash you need, you should consider your more immediate needs as well as your emergency fund. Emergency funds should generally be kept in cash for ease of access; it can be held in a high-yield savings account, for example, where you can withdraw any amount at any time, so you can use it penalty-free when an emergency comes up. Experts generally recommend keeping three to six months’ of basic living expenses in an emergency fund.

The most popular ETFs include S&P 500 ETFs, such as the ultra-popular SPDR S&P 500 ETF Trust (SPY) – the largest exchange-traded fund in the market. It tracks the Standard & Poor’s 500 Index, which consists of 500 large, predominantly U.S-domiciled companies that trade on the major American exchanges. By owning this ETF, you effectively own the S&P 500’s performance, so if it rises, your investment will also rise.

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