Understanding Where People Hold Wealth
Equities, Real Estate, Pension Entitlements, Noncorporate Equity, and Time Deposits
We’ve been doing a ton of posts on wealth recently, from the basics to forecasting models. That’s all great but if we want to take things even further, it’s best to understand the underlying components of what we are looking at.
Before we dig in, I just want to note that the previous posts have been using a measure of net worth that includes both households and nonprofit organizations. I’ve been using that measure because it has a much longer history and because nonprofits don’t really materially change anything. However, we don’t really care that much about nonprofits - or, rather, to not sound completely heartless, it’s better if we just focus on the best detailed data we can get for one thing at a time! So, going forward, the data we use will just be for households.
Let’s start with equities, which have recently been the biggest driver of wealth:
Next, comes real estate, which has a lot less volatility:
Next up, pension entitlements, which grow fairly linearly:
After that, we have equity in noncorporate business, which almost looks like the time series for real estate (surprisingly):
Last, and, kind of least, is time deposits (think stuff like certificates of deposits) and short-term investments:
What do we learn from all of this? Well, equity and real estate are super important. But, so are pension entitlements. To better understand wealth and how it could change in the future we need to better account for the differences in these underlying drivers.
Links
Most Popular Posts | All Historical Posts | Main Site | EM100 | EM1000 | Contact