Target-oriented investment advice
- 17 Downloads
This article puts investments in the perceptive of the investor: investments are no goal in itself, but serve a purpose. Using this perspective, it aims to present concrete recommendations to individual investors and investment advisers about which portfolios should be held by private persons and how to construct these portfolios. Starting from the theoretical foundations that are based on the ‘Hierarchy of Human Needs’ (as proposed by A.H. Maslow in 1943), this article suggests to segregate portfolios into multiple sub-portfolios that each cater for a specific need. This postulation is then integrated with other key observations into a comprehensive, positive and normative portfolio theory. The result is a complete framework for personal financial decision making that is natural and helpful for both advisers and investors, and it integrates financial investments in an optimization of overall well-being.
Keywordsportfolio choice portfolio selection personal financial decision making portfolio theory Maslowian portfolio theory
- Artzner, P., Delbaen, F., Eber, J.-M. and Heath, D. (1997) Thinking coherently. Risk 10 (11): 68–71.Google Scholar
- Bernoulli, D. (1738) Specimen Theoriae Novae de Mensura Sortis. Comentarii Academiae Scientiarum Imperialis Petropolitanae Tomus V: 175–192.Google Scholar
- Cramer, G. (1728) Solution to the St Petersburg paradox. In a correspondence letter to Johann Bernoulli, cited by Bernoulli (1738).Google Scholar
- De Brouwer, P.J. (2011) Maslowian portfolio theory. PhD thesis, Vrije Universiteit Brussel, Pleinlaan 2, 1050 Brussel, Belgium.Google Scholar
- De Brouwer, P.J.S. (2006) Behavioural finance and decision making in financial markets. In: W. Milo and P. Wdowinski (eds.) Financial Markets, Principles of Modeling Forecasting and Decision-Making. Łódź, Poland: Łódź University Press, pp. 24–44.Google Scholar
- Marinelli, N. and Mazzoli, C. (2010) An insight into the MiFID suitability practice: Is a standard questionnaire the answer? http://www2.sa.unibo.it/seminari/Papers/20110125%20Marinelli_Mazzoli.pdf.
- Markowitz, H.M. (1952a) Portfolio selection. Journal of Finance 6: 77–91.Google Scholar
- Markowitz, H.M. (1959) Portfolio Selection: Efficient Diversification of Investments. New York: John Wiley & Sons.Google Scholar
- Maslow, A.H. (1954) Motivation and Personality. New York: Harper.Google Scholar
- Pascal, B. (1654) Expected utility theory. In correspondence with Louis de Fermat on the subject of gambling.Google Scholar
- von Neumann, J and Morgenstern, O. (1944) Theory of Games and Economic Behaviour. Princeton, New Jersey: Princeton University Press.Google Scholar