Overconcentration: Failing to Diversify Increases Risk

Overconcentration occurs when a broker allocates all or a large portion of an investor’s money into one security, one sector, or one industry. This failure to diversify a portfolio increases risk of significant loss, and is not suitable for most investors’ portfolios. Diversification is a key tenet of prudent financial management and one of the main ways a broker can protect clients from extreme losses. If your broker engages in overconcentration, you may lose everything.

Your Broker Has a Fiduciary Duty to Protect Your Investments

Brokers have fiduciary duties to allocate assets in accordance with your goals, needs, and financial situation. These fiduciary duties require acting in your best interest, including acting within the boundaries of your accepted risk. Diversification is a key method of mitigating risk in your portfolio, allowing for possible sharp declines in a specific sector while potentially being safeguarded by profitable investments in other sectors. If your broker has over concentrated your investments in one security, one sector, or one industry, you may have a legitimate claim for stockbroker fraud and potential recourse to recover your losses.

Contact Us to Help Recover Your Losses

If you believe your broker has failed to diversify your portfolio properly, you may be able to recover your losses. The lawyers at Goodman & Nekvasil are dedicated to protecting your rights as an investor, and may be able to help. Contact us now for a free consultation and discover what your options are for fighting investment fraud.

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