Lack of Diversification

Any sort of investment comes with a certain amount of risk attached to it. If people were able to successfully predict exactly what was going to happen with the stock market or other investment vehicles, there’d be a lot more multi-millionaires in the world.

With that being said, there are ways to lessen the potential for significant losses, and one of the basic tactics is diversification. By investing in a variety of vehicles in different sectors, major losses in one area are likelier to be offset by gains in others. While it’s important for any investor, diversifying a portfolio is especially critical for seniors. Because so many older people rely on their investments to get them through their golden years, a significant loss can have devastating consequences for retirees.

When a broker makes an investment recommendation, he or she is obligated to do so only after considering the client’s complete portfolio. If the proposed strategy isn’t made with a mitigation of risk in mind, this could be violation of FINRA’s suitability rules.

The easiest way to diversify a portfolio is by investing in a range of different companies, vehicles, and sectors. For example, in addition to individual company stocks, one can invest in real estate (either directly or through a REIT) and a variety of bond types. Mutual funds and exchange traded funds are also options.

A key component of diversification is to choose different aspects of the larger economy, so any one negative event that affects a particular industry is less likely to cause significant overall losses. If you suspect your portfolio is not properly diversified, an independent financial advisor or accountant can review your strategy and investment history. The Silver Law Group provides a complimentary portfolio analysis for our clients. If we don’t recover money for you, there is no cost for any work performed by the forensic accountant.

In some cases, if a portfolio is overly concentrated on one type of investment, this may not be caused by fraud. This could have occurred for different reasons, including the fact that many financial advisors are limited in the type of investment products they are allowed to sell. That does not absolve a financial professional or a firm from their duty to properly diversify a portfolio, however.

And often, the broker is directly responsible, having done it intentionally to reap bonuses or fees for selling individual investments, or because of negligence. In any scenarios where there is of unsuitable investment advice, an investor may be able to recover lost money through securities arbitration.

If you believe you are the victim of broker misconduct, contact the Silver Law Group for a free consultation from an experienced securities arbitration attorney. We also provide portfolio analysis services to determine the merits of your potential arbitration. You can call us toll-free at 800-975-4345 or just fill out our online contact form. The Silver Law Group only works on contingency, which means you won’t owe us a fee unless you get money back.