Over concentration occurs when a disproportionate amount of an investor’s portfolio is allocated to a single asset class, sector, or security, exposing the investor to heightened risk if that area experiences a downturn. Such a lack of diversification contradicts basic investment principles and can be a result of negligence, lack of understanding, or intentional disregard by a financial advisor or broker. Recognizing the signs of over concentration and understanding its risks are essential steps in protecting your investment portfolio from undue losses.
