Over-Concentration

Over-concentration of an investment account can be defined as the opposite of diversification. When handling the investment account of a client, a stockbroker should strictly adhere to the principle of “not putting all your eggs in one basket”, that is never put a substantial percentage of the money in your account into one investment vehicle only. Common sense will show you that if you put most of your money into a few assets, your portfolio risk will increase drastically. Some examples of over-concentration are:

  • Purchasing/selling short too much stock of the same company (or of companies in the same industry)
  • Investing a substantial part of the money in your account into one mutual fund (or several mutual funds in the same industry)
  • Investing a substantial part of the money in your account into high-yield (junk) bonds

Over-concentration of a portfolio, if carried out without the explicit authorization of the investor, constitutes one type of securities fraud. If you think you have been the victim of a stockbroker who over-concentrated your account you might need an experienced securities arbitration attorney and should call us at (504) 526-2921 or e-mail us at: kirk@reasonoverllc.com.