The Failure to Manage Concentration Risk May Result in Substantial Investment Losses

According to FINRA, "a diversified portfolio tends to be harder to achieve than simply following the mantra: don't put all your investment eggs in one basket. This basic strategy can help, but it is often not enough to avoid concentration risk—the risk of amplified losses that may occur from having a large portion of your holdings in a particular investment, asset class or market segment relative to your overall portfolio."  See Concentrate on Concentration Risk. For example, an investor should carefully evaluate a recommendation by a licensed securities broker or registered investment advisor to purchase or hold a significant amount of stock in one or two industries due to a belief that those industries may ultimately perform well in the future.  A recommendation of this nature may be unsuitable in light of the investor's investment objectives, risk tolerance, and overall financial picture.

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