Financial advisors and brokers have a responsibility to ensure that investments are diversified, meaning investments are spread out between and within asset categories in accordance with the investor’s individual circumstances and financial goals. By diversifying wisely, fluctuations and losses can be limited. Overconcentration occurs when your broker places undue emphasis on one category of investment or security.
Diversification is often critical to creating a balanced, profitable investment portfolio. In a constantly fluctuating market, a broker that invests all or a large amount of funds in one investment product or sector can drastically increase the potential for you to lose money.
When recommending securities liquidation, a broker-dealer must consider whether that will cause an overconcentration in a particular type of securities remaining in your account. Changes or activity that your advisor recommends for your account should always involve a thorough examination of the composition of the remaining securities investments, so that your portfolio always matches your goals and investment profile. If your broker or brokerage firm caused an overconcentration of a particular security in your account, and you suffered serious losses as a result, they may be held liable. You should promptly contact an experienced investor rights attorney to review your case.
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