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At the law firm of Colling Gilbert Wright & Carter in Orlando, Florida, we’ve gained a lot of experience helping people who have been financially hurt by their broker’s failure to diversify their funds. For a free consultation, please call (855) 880-4741 to speak with an experienced stock broker fraud lawyer.
What Is Failure to Diversify?
Most of us have probably read books or articles which urge us to diversify in our investments, and this general agreement stems from the market’s performance over the decades. Humanity knew this principle long before our stock exchange was born, and talked of not putting all your eggs in one basket. But what if the basket is dropped?
The market consists of many investment areas. All good brokers advise us to diversify so that when one part of the stock market is paying poorly or even losing money, the others will almost certainly pay better, and perhaps very well.
This is essential if you want to follow the advice “Invest for the long-term and don’t panic over each little blip”. You can relax about blips in one part of the market if you have some of your money building in other parts that are progressing steadily. And when it all reverses, you can still be relaxed.
Your money can be too narrowly invested in several ways:
- Only in one industry (for example, many people were burned by this mistake when the dot-coms collapsed during the 1990s)
- Only in common stocks (and that would include being in mutual funds that invest only in common stocks)
When one area of the market is doing particularly well, it’s tempting to join the rush and transfer your money for a maximum gain. Perhaps it’s like all the passengers on a sailboat rushing to the same side of the boat: It leads to instability and counteraction.
Although many people have theories and developed hundreds of indicators or variables that can supposedly tell you what the future holds, nobody really knows why stock prices change. The company’s earnings are part of it; so are supply and demand, and people’s feelings and attitudes. There’s a mystery at the heart of it all.
So the wise investment strategy is to spread your money out and look ahead. If you’ve instructed your broker to diversify and find one day that your money is all in one small area, you’d have a valid basis for a lawsuit.
If you have reason to think that your investments have been too narrowly focused without your permission, and if you lose money as a result of that, you have the right to file a lawsuit. At Colling Gilbert Wright & Carter, our attorneys know how to proceed when investors have suffered as a result of broker misconduct. For a free consultation, please call (855) 880-4741 or complete the form on this page.