Concentration occurs when an investment portfolio is not adequately diversified.

This typically occurs when all or the majority of a customer’s portfolio or investible assets are invested in one security or the securities of a single industry. This subjects the portfolio to risks associated with that specific security/company or industry.

Diversification is the primary tool for managing investment risks. Financial industry standards and academic studies consider any portion of an investment portfolio that exceeds ten percent of an account’s asset as being concentrated. Losses that result from over concentration may give rise to a cause of action against broker, brokerage firm or both.