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Florida Business, Whistleblower, & Securities Lawyers / West Palm Beach Overconcentration Lawyer

West Palm Beach Overconcentration Lawyer

Diversification of your investment portfolio is “Investing 101” for your broker. If a broker concentrates your funds in any particular investment, type of investment, or industry sector, the risk of loss becomes exponential. Likewise, it is equally important for a broker to recommend a proper asset allocation between stocks, bonds, cash and other investments. Every broker knows these important principles, but many often fail to follow them or make proper recommendations to their clients. Whether through negligence, incompetence, or intentional actions, overconcentration of a portfolio is simply unsuitable for most investors. The West Palm Beach securities litigation lawyers at Rabin Kammerer Johnson help investors who have been victims of overconcentration bring claims for compensation against the responsible brokers or brokerage firms.

Diversification (and Overconcentration) Comes in Many Forms

The proverb against putting all your eggs in one basket is particularly appropriate to the subject of investments. Having a diversified portfolio is key to a safe investment strategy capable of weathering the ups and downs of financial markets while maintaining steady growth over time. Your broker should be well aware of your investment strategy and risk tolerance. If having a diversified portfolio is important to you, it is vital to understand the many ways in which your portfolio can become dangerously overconcentrated in a particular area. Examples of overconcentration may include putting all your money into:

  • a single stock;
  • a single sector (biotech, banking); or
  • a single asset class (stocks, bonds).

While the broker may in fact have good insight that a particular stock or sector will outperform others, putting too much of an investor’s funds toward that stock, sector or asset class is a high risk strategy which may be unsuitable for the investor. Brokerage firms typically have recommendations regarding asset allocation and diversification, but brokers do not always follow their own firm’s guidance. A broker may have a favorite stock or favorite sector and ignore the firm’s own guidelines. This behavior often leads to overconcentration unsuitable for the investor.

A Mutual Fund Does Not Mean Diversification

An investor’s money can even be overconcentrated in mutual funds. Mutual funds sound like diverse investments, but the funds themselves may be overconcentrated in a particular asset class, such as stocks, or in a particular sector, such as energy or technology. Even if you and your broker have decided to invest heavily in mutual funds, you still want to make sure these funds are diversified and not all invested in the same sector or asset class. If your broker understands your needs for safe investments and a diversified portfolio, then your broker should take care to avoid overconcentration in mutual funds.

Help is Available if Overconcentration has Harmed Your Portfolio

If you believe that your investment portfolio has suffered from overconcentration, lack of diversification, or improper asset allocation, let the attorneys at Rabin Kammerer Johnson review your case and advise you on whether you can make a claim for your investment losses. Call our office at 561-659-7878 in West Palm Beach, toll free at 877-91-4040, or contact us online to schedule a no-cost, confidential consultation with a knowledgeable and experienced Florida securities litigation attorney.