Total economic portfolio (HC + financial capital + pension claims)
A person's total economic portfolio is the sum of three components: human capital (the present value of future net earnings), financial capital (savings, Depot balances, and other liquid assets), and pension claims (state and employer-pension entitlements accrued so far). Financial capital is usually the smallest of the three during a person's working years — allocation decisions based on it alone miss most of what is actually at risk.
Why it matters
Diversification only makes sense against the full portfolio a person actually holds, not just the slice visible in a bank account or Depot. Human capital and pension claims carry their own risk profiles — tied to an employer, an industry, or a state pension formula — and a financial portfolio built without accounting for them can end up concentrated in ways that don't show up in a brokerage statement. A software engineer holding company stock on top of a salary from the same company, for example, has two income streams exposed to one employer's fortunes, not one.
The total portfolio also shifts composition over a working life. Early on, human capital dominates and financial capital is a rounding error by comparison; near retirement, the ratio inverts. That shift is one reason risk tolerance in a financial portfolio is often discussed in terms of age and career stage rather than as a fixed personal preference.
Worked example
Adding the three components together. Someone at age 35 has a human capital present value of roughly €500,000 (built from remaining working years and expected net income), €50,000 in financial capital (Depot plus savings), and €80,000 in accrued pension claims (the present value of state pension entitlements earned so far). The total economic portfolio is €500,000 + €50,000 + €80,000 = €630,000 — financial capital alone is about 8% of that total.
How the mix changes with age. The same framework applied at two career stages shows why allocation guidance often differs by age even when the total portfolio size is similar.
| Life stage | Human capital (illustrative) | Financial capital | Pension claims | Total portfolio | Financial capital share of total |
|---|---|---|---|---|---|
| Early career (age 30) | €600,000 | €20,000 | €15,000 | €635,000 | ~3% |
| Pre-retirement (age 60) | €80,000 | €350,000 | €220,000 | €650,000 | ~54% |
At 30, financial capital is a small slice of a much larger total that is mostly human capital — a stream of future paychecks that behaves somewhat like a bond, since it recurs regardless of market swings. Holding an equity-heavy financial portfolio changes the risk of the small slice, but leaves the overall portfolio's risk profile close to what it already was. At 60, human capital has mostly converted into pension claims and financial capital, so the financial slice now carries most of the total portfolio's risk — the same equity-heavy stance means something different at each stage, even though neither figure by itself says why.
This is an illustrative framework, not a formula to size any specific allocation — actual present-value estimates for human capital and pension claims need a real discount rate, an income trajectory, and the specific rules of the pension system involved.
Check yourself
Someone has a human capital present value of €450,000, financial capital (Depot plus savings) of €30,000, and accrued pension claims worth €70,000. What is their total economic portfolio, in euros?
Which statement best describes the total economic portfolio?
Which of the following are components of a person's total economic portfolio? (Select all that apply.)
A 30-year-old has €600,000 in human capital, €20,000 in financial capital, and €15,000 in pension claims. A 60-year-old has €80,000 in human capital, €350,000 in financial capital, and €220,000 in pension claims. Both hold an equity-heavy Depot. Why might that stance mean something different for each person's total portfolio?