How different are the portfolios of the wealthy from the portfolios of the less well-off?

The Board of Governors of the Federal Reserve System publishes the Distributional Financial Accounts of the United States, which can help us understand the distribution and composition of net worth for US households. Today, we look at the assets of households in various wealth brackets.

The FRED graph above plots total real (inflation-adjusted) assets for the households in different percentiles of wealth over time. Notice how the households in the 90th-99th percentiles (green line) hold roughly the same amount of wealth as the households in the 50th-90th percentiles (red line), even though the former are just 9% of the population and the latter are 40%. In total, as of fourth quarter 2023, they held $18.7 and $17.4 trillion, respectively. The top 1% of US households (purple line) also hold close to the same amount: $14.8 trillion.

The top 0.1% of households (teal line) hold $6.5 trillion in assets, which is more than double the total amount of assets held by the bottom 50% (blue line, $3.1 trillion). These two groups had been much closer in terms of total wealth until they began to diverge in the late 2000s.

Now we dig into the types of assets these different groups hold in their portfolios: Our first major distinction is between nonfinancial assets (such as housing, automobiles, and other vehicles) and financial assets (such as stocks, bank deposits, and pension entitlements). The second FRED graph plots the share of nonfinancial assets by wealth group. Notice the inverse relationship between level of wealth and share of nonfinancial assets: On average, about 70% of the assets of the least wealthy tend to be their homes and vehicles. Nonfinancial assets become a progressively smaller share of assets as wealth increases and financial assets become more dominant.

The third FRED graph confirms the previous point. It plots the share of real estate in total assets for the different wealth percentiles. Again, there is a very clear negative relationship between the importance of real estate and one’s level of wealth. As of fourth quarter 2023, the bottom 50% of households hold just over 50% of their assets in real estate; the top 1% and 0.1%, respectively, hold 13.1% and 9% of their total assets in real estate.

The final FRED graph shows how much financial wealth is held in equity, both corporate and noncorporate. We see a very clear positive correlation between the level of wealth and the share of financial assets held in the form of equities: The top 0.1% of households hold about 70% of their financial wealth in equities versus 15% to 20% for the bottom 50% of households.

The share of households’ equities changed in a variety of ways during the COVID-19 pandemic, between first quarter 2020 and fourth quarter 2023:

• The 90th-99th percentiles had a large jump in the percentage of their financial assets held in equities, from 37.0% to 47.2%.
• The bottom 50% and 50th-90th percentiles also had a jump, from 14.8% to 19.3% and 19.3% to 23.8%, respectively.
• The top 1% and top 0.1% both had smaller increases in their share of financial assets held in corporate equities, from 69.2% to 72.8% and 75.7% to 77.9%, respectively.

A little background on the data and the source: For several decades, the Board of Governors of the Federal Reserve System has collected data on the Financial Accounts of the United States, which measure the financial position and portfolio composition of different sectors of the US economy, from financial institutions to households. These data are available in FRED. More recently, the Board started publishing data on the Distributional Financial Accounts of the United States, which is a quarterly dataset that estimates the distribution of US household wealth since 1989, combining aggregate measures from the Aggregate Financial Accounts and disaggregated data from the Survey of Consumer Finances.

How these graphs were created: Search FRED for the following series: First graph: Total Assets held by the bottom 50%. Use the “Edit Graph” panel to search for and add Consumer price index for all urban consumers: all items in the U.S. city average. In the formula bar, insert 100*a/b. Use the “Add Line” tab to repeat this for the other wealth groups: 50th to 90th, 90th to 99th, top 1%, and top 0.1%.
Second graph: Percentage of nonfinancial assets help by the top 0.1%. Use the “Edit Graph” panel to search for and add Total assets held by the top 0.1%. In the formula bar, insert 100*a/b. Use the “Add Line” tab to repeat this for the other wealth groups. Third graph: Real estate held by the top 0.1%. Use the “Edit Graph” panel to search for and add Total assets held by the top 0.1%. In the formula bar, insert 100*a/b. Use the “Add Line” tab to repeat this for the other wealth groups. Fourth graph: Corporate equities and mutual fund shares held by the top 0.1%. Use the “Edit Graph” panel to search for and add Equity in noncorporate business held by the top 0.1% and Financial assets held by the top 0.1%. In the formula bar, insert 100*(a+b)/c. Use the “Add Line” tab to repeat this for the other wealth groups.

Suggested by Miguel Faria-e-Castro and Samuel Jordan-Wood.