Investment Portfolios and Human Wealth

Abstract

Summary the households had a level of net worth of $11,840 o r A conservative estimate of human wealth was used t oless. Th e median level of human wealth was $177,150. calculate total wealth of households. The ratio ofT he median l evel of total wealth (net worth plus human financi al assets to total wealth is small for most U.S.w ealth) was $276,100 . (It is in general not the case that households. Fluctuations in financial wealth represen tthe sum of medians e qual the median of the sum, as the ver y small differences in the total wealth of mostme dian will represent different households, so no hou seholds. Therefore, investments in stocks may b eaddition or division should be attempted for different rational for almost all non-elderly households, to thevariables in Table 1). exten t they can commit money to retirement and othe rThe median level of the ratio of financial assets to totalwealth was 1.3%, thus, for half of the households, R elatively few households have enough financial assetsfinancial assets represented less than 1.3% of total to merit active management of investments. Only 10%wealth (Table 1). The 75th percentile of this ratio was of all households have $73,700 or more of financial5.7%, thus, for 75% of the households, financial assets assets. Therefore, the need for financial education isrep resented less than 5.7% of total wealth. The 90th obvious.percentile of this r atio was 17.4%. Therefore, only for asmall proport ion of U.S. households did financial assets If the stocks and other financial assets fluctuaterepresent a high percent of total wealth. substan tially, there may be little impact on the totalT his conclusion is e ven stronger if

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