Is the market for securities segmented, in the sense that different groups of investors concentrate on different groups of assets? According to the authors’ examination of the demographic backgrounds, investment attitudes, and portfolio compositions of a retail broker’s clients, it is.
Respondents to the authors’ questionnaire fell neatly into five demographic groups. When these groups were rated on their investment goals, the kind of information they used, and the number and kind of assets in their portfolios, a definite pattern emerged. In general, the older investor was more conservative in his investment behavior, placed less emphasis on short-term capital gains and more on dividend income, relied less on broker advice, spent more time on security analysis, and had a more diversified portfolio containing fewer high-risk assets. The portfolios of older females were especially conservative, diversified, and dividend-oriented.
The respondents’ brokerage transactions over the period 1964 to 1970 revealed that the compositions of the portfolios produced by those trades varied significantly across the five groups. Groups I (retired males), IV (older females) and V (unmarried professional and managerial persons) all held corporate securities, but Group I especially emphasized savings accounts and fixed income securities. Groups II (older employed males) and III (highly educated young professionals) were strongly invested in real estate and their own businesses. More than any other, Group II emphasized life insurance protection.
This evidence of market fragmentation suggests that purveyors of financial services have much to gain by being selective in their appeals to various classes of customers. When a retired male walks through the door of a brokerage office, the account executive can predict with a fair degree of confidence the kind of investment products that are apt to strike a responsive chord.