Overconcentration

“Overconcentration” is an investment term which expresses the old adage, “don’t put all your eggs in one basket.”

Examples of overconcentration include an account that is invested only in:

  • One stock or a few different stocks
  • A single sector of the economy (i.e. investing only in gold or precious metals)
  • One investment asset class (such as purchasing just stocks, rather than stocks and mutual funds)
  • Without a portfolio spread across multiple investment avenues, the investor could faces dire economic consequences. For example, if an investor puts all her money in a single startup company, and the company goes out of business, the investor loses 100% of his/her account.

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