Pareto Principle

The Pareto principle is also called the 80-20 rule. This principle is based on the discovery by economist and sociologist Vilfredo Federico Pareto (1848-1923) that in Italy at the time, around 20 percent of the population held 80 percent of total wealth.

Similar proportions have since been found in many different economic fields.

The Pareto principle is also applied in wealth management, in the sense that asset managers may, for example, invest 80 percent of assets through conservative investment vehicles and 20 percent of assets in more dynamic investment categories like alternative investments.

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.