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Overconcentration in Stocks, Bonds, Mutual Funds

Modern Portfolio Theory requires diversification and that the advisor/broker divide your assets between stocks, bonds, and cash. If a broker recommends a concentrated position in a particular stock, bond, or mutual fund, he must obtain approval from both the customer and his supervisors. A properly diversified account is the best way possible to minimize your risk and avoid excessive losses.

Simply stated, diversification means following the old adage of not putting all your investment eggs in one basket. Overconcentration occurs when the investments in your portfolio are disproportionately weighted in one asset class, such as stocks, or when holdings in an asset class are concentrated in a particular sector or even the stock of a single company. If your account includes stocks, bonds, or equity mutual funds that are concentrated in particular sectors, your account may not be properly diversified; therefore your risk of loss ” which can occur rapidly ” has increased dramatically. Diversification is an essential element of any successful investment strategy and your broker has the duty to help you achieve this goal. His job is to help you achieve your investment objectives within the parameters of your time horizon and risk tolerance. An over-concentrated position is generally contrary to prudent investing.

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From its offices in Connecticut and Florida, the Law Offices of Howard M. Rosenfield has been representing investors nationwide in securities arbitrations and mediations for over 30 years. Please call now, toll-free, for more information if you believe that you suffered an investment loss: (860) 677-4334.

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Howard Rosenfield is truly a life saver. After months of working with my financial advisor, I found out he was making risky investments without my knowledge. When I discovered how much money I lost, I thought there was nothing I could do. Howard explained all the difficult terms and what exactly my financial advisor did wrong. If it wasn't for Howard, I would never have recovered my losses and would be under extreme financial distress to this day. J.
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