To protect investors, brokers should attempt to diversify their clients' investment portfolios. Diversification helps to reduce a portfolio's overall risk because it spreads risks over a variety of business sectors and classes of securities.  Diversification helps to mitigate the loss for investors in case of a major downturn in a particular industry or class of securities. Brokers should discuss with their clients the benefits of a diversified portfolio. For example, if a broker invests a large portion of a client's portfolio in one stock and that stock experiences a significant decline, the broker may be responsible.

To learn more about over-concentration call us at 1-800-294-9198, or contact us online.