What's the best long-term investment? Because you're a money nerd (and a GRS reader), I hope your answer to this question was, "Stocks!" If the future is anything like the past, that's the correct answer. History has shown that stocks are the best long-term investment -- and by a wide margin.

Unfortunately, most Americans believe otherwise.

As a part of its annual Economy and Personal Finance survey (conducted during the first two weeks of April), Gallup News asked 1017 American adults, "Which of the following do you think is the best long-term investment: bonds, real estate, savings accounts or CDs, stocks or mutual funds, or gold?"

Here's how people answered:

• 35% of respondents said that real estate is the best-long term investment
• 21% said that stocks or mutual funds are the best long-term investment
• 17% said that savings accounts or certificates of deposit are the best long-term investment
• 16% said gold is the best long-term investment
• 8% said bonds are the best long-term investment

While acknowledging that past results are no guarantee of future performance -- let's take a look at why I think Americans haven't got a clue when it comes to figuring out the best long-term investment strategy.

The Rate of Return on Everything

The August 2019 issue of The Quarterly Journal of Economics included a paper entitled "The Rate of Return on Everything, 1870-2015". Over an astounding 74 pages of discussion, the authors attempt to analyze the long-term (145-year) rate of return on a variety of assets around the world.

The paper examines four popular investment vehicles:

• Bills, by which the authors mean Treasury bills, are short-term government bonds. At present, these are a good proxy for the rates you can earn with a high-yield savings account. (I don't think this is always the case, though.)
• Bonds, which in this case refers to ten-year government bonds (such as a 10-year Treasury note).
• Equity, which is another way to describe common stock. Here, the authors are measuring overall stock market performance.
• Housing, including rental properties.

We'll look at each of these in greater detail in a moment (and we'll look at gold too), but for now let's look at this paper's overall findings. While the authors looked at data for many countries, I'm only going to share results for the U.S. The following table shows the rates of return for these different asset classes over three different time periods. (Remember that, for our purposes, Bills are a stand-in for savings accounts.)

From this table, it's clear that equities (i.e., stocks) have been the highest return investments over long periods of time. Nothing else comes close. (Outside the U.S., this isn't always true.)

Now, while stocks provide the best long-term returns, they also come with the greatest volatility. Here's a a chart (Figure VII) from the paper that shows just how crazy the ride with stocks can be. (Also note how closely equities and real estate tracked each other until the Great Depression.)

It's this volatility that scares so many people away from the stock market. They're afraid that a sharp decline can come at any time. And that's true. But what's also true is that a prolonged bull market can occur at anytime, as we experienced from March 2009 to February 2020! If you're a long-term investor, you don't give a fig about short-term market movement.

Let's dive deeper into the long-term investment returns provided by the asset classes in the Gallup poll: real estate, stocks, savings accounts, gold, and bonds.

One of the fundamental ideas I try to promote here at Get Rich Slowly is your savings ought to be invested for long-term growth. You ought to use the magic of compounding to create a wealth snowball.

Naturally, you want put your money into an investment that offers a reasonable return and acceptable risk. But which investment is best? I believe -- as do most financial experts -- that you're most likely to achieve high returns by investing in the stock market.

But why do so many people favor the stock market? How much does the stock market actually return? Is it really better than investing in real estate? Or Bitcoin? Let's take a look.

How Much Does the Stock Market Return?

In Stocks for the Long Run, Jeremy Siegel analyzed the historical performance of several types of investments. Siegel’s research showed that for the period between 1926 and 2006 (when he wrote the book):

• Stocks produced an average real return of 6.8%. "Real return" means return after inflation. Before factoring inflation, stocks returned about 10% annually.
• Long-term government bonds yielded an average real return of 2.4%. Before adjusting for inflation, they had a return of about 5%.
• Gold had a real return of 1.2%. "In the long run, gold offers investors protection against inflation," writes Siegel, "but little else."

My own calculations — and those of Consumer Reports magazine — show that real estate does worse than gold over the long term. (I come up with a real return of just under one percent.) Yes, you can make money with real estate investing, but it's far more complicated than just buying a home and expecting its value to soar. (It's important to note that returns on real estate are a contentious subject. This recent academic paper analyzing the rate of return on "almost everything" found that housing actually outperforms the stock market by a slight margin.)

Siegel found that stocks have been returning a long-term average of about seven percent for 200 years. If
you’d purchased one dollar of stocks in 1802, it would have grown to more than $750,000 in 2006. If you’d instead put a dollar into bonds, you’d have just $1,083. And if you’d put that money in gold? Well, it’d be worth almost two bucks — after inflation.

As a saver, I have a personal interest in higher interest rates: I earn more. But as a conservationist and environmentalist, I know that low rates enable a certain kind of long-term thinking. Now, while rates are at generational lows, circumstances are perfect for thinking long-term.

About twenty-five years ago (as an example of long-term thinking), I had a whimsical investment idea: Buy some cheap land and plant hardwood trees. The trees wouldn't be ready to harvest for 100 years or so, but it would have been a cheap investment with (eventually) a fairly large payoff.

It takes a certain perspective to make such a long-term investment. I call it a whimsical idea because I'd never have been able to enjoy the financial return. I was already in my mid-20s at the time. Even if I'd selected the hardwoods for quick maturity, they wouldn't have been ready until I was well into my 90s.

My husband and I are in the early stages of building a house. As we modify our floor plans, the amount we'll need to borrow to build is on our minds. It's probably going to be the most expensive thing we'll ever purchase, and we need to decide what we want to borrow and what loan term we'll want.

The main differences between 15- and 30-year loans are straightforward. Fifteen-year loans have higher monthly payments, but you pay less interest, while 30-year terms have lower monthly payments, but you pay significantly more for the house in the long run. As with most areas of personal finance, however, this decision is about more than just the math. There are other important considerations, such as retirement savings, risk tolerance, and discipline.

If one moves confidently in the direction of his dreams, and endeavours to live the life which he has imagined, he will meet with a success unexpected in common hours. — Henry David Thoreau

What would you do if money were not a concern? Would you quit your job? Would you travel? Would you live in another state? Another country? Would you write? Would you garden? Would you devote your life to charity? Would you race cars? Would you enter politics?

Many people make poor financial decisions because they don't have long-term personal goals. If you don't understand that buying a new cell phone or playing a game of poker takes money from a larger goal — a new home, a new car, a vacation to Europe — then there's no incentive not to use the money for whatever seems fun at the moment.

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Longtime readers may remember a few things about me:

• At various times, I've studied to be a priest, a doctor, a teacher, and a financial advisor (though I was only two of those).
• My posts can get so technical (okay, boring) that J.D. has to enliven them with cat pictures.
• I've tried to lose weight over the past couple of years, and have concluded that reducing heft is very similar to building wealth.

Regarding the latter, I reported in January that I was down about 25 pounds in 18 months. Not bad — at least good enough to get me on public radio's Marketplace (in case you're dying to hear my nasally voice). Managing your cash and managing your flesh both start with giving up short-term pleasure for long-term gain.

This occurred to me again as I met earlier this summer with Ben Sterling, my office's resident Wellness Fool. His scale told us that I had gained back almost seven of the pounds I had lost. I had still been exercising, but not as much and not as intensely, and I didn't pay any attention to what I ate. Ben, in his wisdom, knew he had to give me more motivation — and given my financial background, he knew that motivator was money (though for me it's the preservation of it, not the making gobs of it). So we made a bet: I would lose six percentage points of body fat by mid-September or I'd pay him $200 (which would go toward buying exercise equipment for the Fool office).

In my last post, I talked about how personal finance is about playing the long game and "making choices that are harder in the short term for the good of the long term." But when the payoff is so many years down the road, it can be difficult to stay on track. In order to actually reach long-term goals, you have to keep making the right choices day after day. How easy is it to fall off the wagon a week or two after you start a new diet, for instance? You need a game plan for the short term that supports your long game too.

Establish Priorities

Especially when you are young, there are just so many goals to strive for simultaneously. For example, Jake and I currently have the following goals:

• 

  House projects. We replaced our HVAC and decided solar panels aren't for us right now, but we still need to demolish a corroded metal shed and resurface our back deck.

When I told readers that January would be "back to basics" month at Get Rich Slowly, the number-one request I received was to write about how to invest.

Rather than scatter investing info throughout the month, I decided to collect the essentials into one mammoth article. Here it is: all you need to know about how to invest -- even if you're a beginner.

In writing this article, I tried not to bog it down with jargon and definitions. (I'm sure I let some of that slip through the cracks, though. I apologize.) Nor did I dive deep. Instead, I aimed to share the basic info you need to get started with investing.

What follows are eight simple rules for how to invest. And in the end, I'll show you how to put these rules into practice. First, let's dispel some popular misconceptions.

Investing isn't Gambling -- and It isn't Magic either

Investing scares many people. The subject seems complicated and mysterious, almost magical. Or maybe it seems like gambling. When the average person meets with his financial adviser, it's often easiest to sit still, smile, and nod.

One of the problems is that the investing world is filled with jargon. What are commodities? What's alpha? An expense ratio? How do bonds differ from stocks? And sometimes, familiar terms – such as risk – mean something altogether different on Wall Street than they do on Main Street.

Plus, we're bombarded by conflicting opinions. Everywhere you look, there's a financial expert who's convinced she's right. There's a never-ending flood of opinions about how to invest, and many of them are contradictory. One guru says to buy real estate, another says to buy gold. Your cousin got rich with Bitcoin. One pundit argues that the stock market is headed for record highs, while her partner says we're due for a "correction". Who should you believe?

Perhaps the biggest problem is complexity – or perceived complexity. To survive and seem useful, the financial services industry has created an aura of mystery around investing, and then offered itself as a light in the darkness. (How convenient!) As amateurs, it's easy to buy into the idea that we need somebody to lead us through the jungle of finance.

Here's the truth: Investing doesn't have to be difficult. Investing is not gambling, and it's not magic.

You are perfectly capable of learning how to invest. In fact, it's likely that -- even if you know nothing right now -- you can earn better investment returns than 80% of the population without any scammy tricks or expensive tips sheets.

Today, I want to convince you that if you keep things simple, you can do your own investing and receive above-average returns – all with a minimum of work and worry. Sound good? Great! Let's learn how to invest.

Looking for a new job is a multi-faceted process. I've discussed many aspects of career-building that apply even if you are just trying to keep a job you already have. But laying the groundwork for a successful job search is about more than just your reputation. A job search can take months -- in some cases, up to a year or more -- so it is very important to be prepared financially before you start to look.

How to prepare financially for a job search

1: Beef up your emergency savings

To cover the gap between your last paycheck at your old job and your first paycheck at your new job, it is a good idea to beef up your savings. There are many reasons this could be the case: You may need to relocate for your new job, you may find it difficult to time your start and end dates, or you may be laid off or terminated before you can line something else up. These challenges can have a ripple effect on your finances.

For example, if your new job will require that you relocate, your significant other may also need to leave their current job. If you are the primary breadwinner in your family (or you are single) then having a gap in your income can have a major impact on your life. This is especially the case if you are living paycheck to paycheck.<

You may have noticed that, since last September, many of my posts here at Get Rich Slowly have focused on the job search. Some of you may have wondered why I would write about such a topic at all, since my job tenure was over seven years.

Well, it's because I have been job-hunting. And I succeeded! As I write this, I just wrapped up my first week at a new job.

So I thought it would be helpful to revisit some of the posts I wrote during that time to see what job search tips actually worked for me as I went through the process. Here's an overview of how I approached my job search and what made it successful.