While nobody likes losing money in the stock market, recent sharp market declines may reveal unsuitable investments in your portfolio, giving you an opportunity to assess the investment strategy implemented by your broker, according to investment fraud attorney David P. Meyer.
“Stock market returns have been high for the last few years. In that kind of environment, many stockbrokers feel pressured to seek higher returns for their customers to try beat the market average,” said Meyer. “But to do that, they need to take on more risk and oftentimes that risk is inappropriate for their customers.”
According to Meyer, “In rising markets, the underlying riskiness of your investments may be concealed as ‘rising tide lifts all boats.’ But when markets correct, and they always do, you may find that your portfolio is losing money at an even faster pace than what should she appropriate for you given your investment objectives. If that’s happening to you, it may be because your portfolio is concentrated in higher-risk investments and you don’t even know it.”
Meyer says that a good strategy for avoiding unsuitable investments is to be realistic about long-term market returns and to have an appropriate allocation of stocks, bonds, and cash that makes sense based on your age, objectives, and risk tolerance.
Meyer says you also need to keep your financial advisor accountable.
“Many investors don’t realize it, but brokers are required under the law to recommend only suitable investments to their customers,” he said. “If your broker fails to do that and if you suffer losses as a result, then you can pursue legal claims against the brokerage firm to get your money back.”
The investment fraud lawyers at the law firm of Meyer Wilson have been representing investors throughout the U.S. since 1999. They have recovered over $350 million on behalf of their clients. Contact us today for a free case evaluation.