Stockholdings of first-time and more experienced investors

Purpose - The purpose of this paper is to examine whether socio-economic factors influence portfolio composition of individual investors investing in stocks for the first time and how these factors relate to stock portfolio performance. Design/methodology/approach - The study uses cross-sectional time-series analysis to examine a unique and detailed data set of Swedish stockholdings. Findings - The results show that first-time investors do not hold diversified portfolios. They experience high market risk and, on average, underperform more experienced investors. Males have higher unsystematic risk in their portfolios than females and older investors have more diversified portfolios compared to younger investors. Research limitations/implications - The results show that individual investors should improve their insights by incorporating risk when investing in stocks. Practical implications - Given the results of this paper, the movement from defined benefit to defined contribution pension schemes in many countries raises the issue of the need to better understand and monitor the risks in stock portfolios. Originality/value - This study provides insights into whether socio-economic factors influence portfolio composition, the extent to which socio-economic factors and portfolio characteristics relate to portfolio returns, and whether portfolio performance between first-time and more experienced investors differs.