Attorneys Helping Investors File Claims When Stockbrokers Fail to Diversify Their Investment Purchases

Professional counsel if your portfolio suffers due to overconcentration

Diversification is a fundamental tenant of investment strategy. Investor portfolios should never be over-concentrated in one particular business or market sector. Investing in a broad range of businesses, through a variety of investment types – such as stocks, bonds, and Treasury bills, and in different industries helps to reduce investor risk and increase the return on their investments.

The Frankowski Firm has a strong track record of successfully handling securities arbitration cases based on overconcentration and failure to diversify.

When does overconcentration/failure to diversify occur?

The proper allocation of investments depends on the investor’s needs and financial circumstances. Some investors can wait longer for a return and are willing and able to accept varying levels of risk. Other investors may need an immediate return and are only willing to accept low or moderate risk. Younger investors have more time to see results than older investors. A good broker reviews all relevant factors first and then recommends a diversified portfolio that best suits the investor’s goals and risk tolerance.

Some examples of overconcentration are:

  • Overconcentration in just one company. Investing in one company could cause the investor to lose his/her investment, or see a much lower return than expected.
  • Industry overconcentration. Just as individual companies can lose money, industries have their ups and downs, too. Typical market fluctuations can cause an industry sector to suffer, as can foreign competition, U.S. competition, the introduction of better products, and fears about the economy. Investing only in one sector of the economy is a mistake.
  • Failure to diversify by product type. A good portfolio should consider investments in equities, bonds, and cash. Investing in multiple investment products will reduce volatility and allow for better returns over the long haul.

Stockbrokers should review which investments are best for short term versus long term, which investments are high risk/high reward, which investments are likely to produce steady income, and which investments have underlying costs that negate positive returns.  A diversified portfolio should meet the expectations of the client and should take into consideration all of the risks and rewards that different product types and industry sectors may provide.

If the failure to diversify harmed your portfolio, seek help now

The Frankowski Firm holds accountable brokers, supervisors, and firms that fail to heed their clients’ needs and goals by failing to diversify their portfolio. At a minimum, stockbrokers and investment firms should recommend well diversified portfolios to their client and inform the investor of the full range of investment options that are appropriate for the client’s needs. Call The Frankowski Firm today at 888-741-7503 for a review of your portfolio. Your broker may be liable for over-concentrating your investments. You can also complete our contact form to make an appointment.