There is ample evidence that most households hold rather simple portfolios, composed basically of real estate and deposits.6 However, the development of financial markets and the creation of new financial instruments have facilitated the diversification of households’ portfolios. Stock holdings have increased, mainly through the commercialisation of mutual funds and retirement accounts, and this has allowed more households to benefit from the equity premium.
On the other hand, and in light of the problematic financial situation faced by many households during the recent financial crisis, more research will be needed to see whether financial innovation could have negative effects on some households and to what extent households are able to understand the risks they are exposed to, e.g. once house prices start to decline substantially.