An exploratory study of portfolio objectives and asset holdings

This study examines the relationship between asset holdings and portfolio objectives. It demonstrates that asset holdings across a wide variety of investment alternatives (stocks, bonds, mutual funds, CD's, life insurance, home, pension plans and tax products) vary systematically as a function of the relative importance placed on multiple objectives (current income, capital appreciation, retirement, family education, etc.) and investor characteristics such as the stage of the family life cycle, income, wealth, education and level of risk aversion. The portfolio of objectives, in turn, are related to the stage of the family lifecycle as well as wealth and attitude toward risk (risk aversion). Both the direct and indirect (via portfolio objectives) effects of investor characteristics on asset holdings are examined. The results provide insights into investor motivations and life cycle savings behavior.