Personal Investing: Advice, Theory, and Evidence

Data from a unique survey containing information on the composition of the respondents' total asset holdings—both inside and outside their retirement accounts—shed light on individual asset-allocation behavior. Individual asset allocations are consistent with the recommendations of expert practitioners and with the prescriptions of economic theory. The survey respondents maintain in cash and near-cash investments a proportion of their wealth that declines as wealth increases. They hold these safe assets outside their retirement accounts. The proportion of total assets that they hold in equities declines with age and rises with wealth. They do not appear to manage their assets across retirement and nonretirement accounts to maximize tax efficiency.