Sprudzs (1998). Diversification or concentration? An empirical analysis of household portfolio allocation practices. Financial Counseling and Planning, 9 (1)


Sprudzs, U. (1998). Diversification or concentration?
An empirical analysis of household portfolio allocation practices. Financial
Counseling and Planning
, 9 (1), 75-88.


Diversification or Concentration?

An Empirical Analysis of Household Portfolio Allocation
Practices

Ugis Sprudzs(1)

This article finds that well-diversified portfolios
are rare among households owning discretionary financial assets. Indeed,
most households concentrate their portfolios in a single asset class. In
1995, two thirds of American households had average allocations over 90%
in constant dollar instruments, while 15% had portfolios dominated by a
risky category. After controlling for other variables, differences were
found in risk tolerance, shopping behavior, interest rate expectations,
and investment goals between groups of households with dissimilar portfolio
types. Financial advisors might use this information to develop educational
strategies best suited for various portfolio orientations.


Key Words: Household portfolios, Investment, Saving,
Survey of Consumer Finances

1. Ugis Sprudzs, Senior Consultant
with the Financial Services Consulting practice at KPMG Peat Marwick LLP.
Address: 411 North Maple Avenue, Oak Park, IL 60302-1809, telephone: 708-386-1823,
FAX: 708-386-8316.
E-mail:
usprudzs@gsbalum.uchicago.edu

The author would like to thank the editor and Joy Roberts
for their support and encouragement, Dave Yurkee and the SAS Institute
for assistance with the data, as well as three anonymous reviewers for
their insightful suggestions.

The views expressed in this article are those of the
author and do not represent the opinion of KPMG Peat Marwick LLP, its management,
or affiliates.


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