RT Journal Article
SR Electronic
T1 The Extended Portfolio in Private Wealth Management
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 36
OP 45
DO 10.3905/jwm.2008.706271
VO 11
IS 1
A1 William W. Jennings
A1 William R Reichenstein
YR 2008
UL https://pm-research.com/content/11/1/36.abstract
AB The authors assert that a private wealth manager should manage an individual's extended portfolio that contains financial assets like stocks and bonds along with non-financial assets such as human capital and future benefits from Social Security and defined-benefit pension plans. The optimal allocation of an individual's financial portfolio must recognize that it is but one part of an extended portfolio. If human capital is bond-like then, when human capital is substantially larger than financial assets, an individual's financial portfolio should be heavily allocated to stocks. Similarly, benefits from a defined-benefit pension plan or a fixed payout annuity are essentially “bonds” in an extended portfolio. Everything else the same, individuals with such bond-like extended portfolio assets should allocate a larger portion of their financial portfolios to stocks. The article examines these and other investment implications of this extended portfolio framework.TOPICS: Retirement, portfolio construction, portfolio theory