Investors seeking to limit their exposure to the risks of the financial markets often turn to investment professionals, such as brokers and financial advisors, to manage their investment portfolios. These professionals are required to tailor investment strategies to match an individual’s financial goals, risk tolerance, and time horizon.
However, unscrupulous or negligent brokers might jeopardize their clients’ financial well-being through overconcentration.
Overconcentration occurs when a substantial portion of your investment portfolio is allocated to a single asset, sector, or type of investment. This can happen intentionally, due to a strong belief in a particular investment, or unintentionally, due to a lack of diversification. An investment professional may believe that investing heavily in a particular industry, such as the tech sector, will yield substantial returns and allocate a significant portion of the portfolio to tech stocks. Doing so, however, poses serious risks.
Investment professionals have a duty to provide their clients with a well-managed and balanced portfolio to avoid unnecessary losses. If a broker fails to diversify their client’s account, they may be liable for damages. If you lost money and suspect misconduct, consider seeking a third-party opinion, such as an attorney with expertise in securities law. They can review your investment history to identify overconcentration (or any other irregularities) and determine what recourse might be available to you.
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