Is my broker required to adequately diversify my investment portfolio?
Yes, your broker is required to maintain an adequately diversified portfolio consistent your investment objectives and risk tolerance.
When describing what it means when a broker fails to diversify investments, we often make reference to the old saying: “don’t put all of your eggs in one basket.” This saying has particular relevance in investing. Your investment advisor has a duty to make sure that your investment risk tolerance and investment objectives are being recognized and abided by. As part of this duty, your investment portfolio should be adequately diversified in hopes of keeping with your directives. This means that different products should be purchased in different markets and sectors to avoid a total loss in the event of problems with any one particular investment.
For example, an account that is for retirement purposes should not be invested solely in high risk stocks. Rather, the account should be invested in a variety of different types of investments, and further, should be invested in different investments within each category of investments. This means that if a portfolio encompasses stocks, different types of stocks should be purchased, with each stock carrying a different loss potential, preferably across different markets (not solely invested in energy stocks, for example). A properly diversified portfolio may include a mixture of different products, such as stocks, bonds, mutual funds, and/or money market accounts. A properly diversified account will never be made up solely of stocks, especially high risk stocks.
If your accounts have sustained losses due to your investment advisor’s failure to adequately diversify your investments, you may able to recoup your losses through arbitration or through a lawsuit.
Israels & Neuman PLC has knowledgeable securities attorneys that represent investors who have suffered losses due to the actions of brokers, financial representatives, broker-dealers, and financial institutions. We have represented numerous victims of undiversified accounts in FINRA arbitration proceedings throughout the country.
All of our financial arbitration cases are taken on a contingent basis, meaning that we do not get paid unless we recover compensation for you.
HAVE YOU SUFFERED LOSSES BECAUSE YOUR FINANCIAL ADVISOR IGNORED YOUR INVESTMENT OBJECTIVES OR FAILED TO DIVERSIFY YOUR INVESTMENTS?
Aaron Israels: (720) 599-3505
David Neuman: (206) 795-5798