Overconcentration
(Failure to Diversify)

A basic principle of sound investing is not putting too many eggs in one basket. When a broker concentrates too much of your money in a single investment, company, or sector, a downturn in that one area can do far more damage than it should. That is overconcentration, also called failure to diversify.

Diversification Was Their Job

Managing risk through diversification is part of what a financial professional is supposed to do for you. When they concentrate your savings in a way that does not fit your needs, the resulting outsized loss flows from their choices, not yours.

What Overconcentration Looks Like

• Most of your savings in a single stock or investment
• Heavy concentration in one sector or industry
• Too much in one product type, such as a single annuity or fund
• Concentration that does not match your need for safety or income
• Failing to rebalance when one holding grew too large

Signs Your Account May Have Been Overconcentrated

• One investment or sector made up most of your account
• A single holding’s decline caused most of your losses
• You were not told how concentrated you were
• Your conservative goals did not match a high-concentration approach