Exceptional and accessible legal representation across Kentucky and Nationwide

Exceptional and accessible legal representation across Kentucky and Nationwide

EXCEPTIONAL AND ACCESSIBLE LEGAL REPRESENTATION ACROSS KENTUCKY AND NATIONWIDE

How to tell if your portfolio includes unsuitable investments

| Jul 9, 2020 | Firm News |

An investment strategy can be as personal as your wardrobe. Some prefer flashy, eye-catching choices, while others maintain a very traditional sensibility. Those same descriptions can also apply to individual investors and the suitability of their investment portfolio, and an unsuitable investment strategy can be like wearing a linen shirt in driving snow: dangerously out of step.

Many people invest a large portion of their net worth and place their faith and fortune in the hands of a variety of fiduciaries, such as financial advisors and stockbrokers. That means these fiduciaries must choose “suitable” investments that match their clients’ needs, and if they do not, they may be in breach of fiduciary duty.

What does an unsuitable investment look like?

An unsuitable investment is, according to Investopedia, one that “does not meet the objectives and means of an investor.” Since”suitability” is a guiding principle for financial fiduciaries, you’ve likely had a conversation about:

  • Your means: What are your sources of income? How much have you saved? How secure are your assets for the future?
  • Your objectives: What sort of return are you looking for? Do you want short-term, high-yield gains or steady, long-term performance?
  • Your risks: Based on your means, objectives, and where you are in life, what level of risk are you comfortable with?

The professional advising you should make it abundantly clear the risks to your financial safety.

Absent any obvious performance failures, the layperson can find it challenging to identify what is or is not risky. However, certain types of investments carry more or less risk; for example, futures are considered risky, whereas bonds are considered very low risk. A simple review of your statements can reveal the types of securities that make up your portfolio.

Keep a “weather” eye on your portfolio

A breach of fiduciary duty is actionable in civil court. If you observe a higher percentage of your portfolio is riskier than you’ve been led to believe, it is time to seek additional assistance, perhaps from an attorney experienced in securities law.