By Bruce Buerkle, CFA, Senior Vice President, Manager Securities Research Support

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By combining multiple types of investments—like large, small, growth, value and international companies— as well as having representation in different asset classes and business sectors, you may be able to not only keep up with inflation, but also get a suitable rate of return for a manageable level of risk. Having too much in one stock is called a concentrated equity. You may have inherited the position or were awarded the stock from your employer. With the volatility we have seen in the markets over the past year, the risks inherent in concentrated equities or sectors may have grown.

As a general rule, we do not like to see more than 15% in any one stock or more than 20% in one industry.  If position sizes are greater, a drop in price could materially affect your savings and your goals. Take a look at your investments to see if you have any concentrated positions and consider reducing your exposure if you do.

Asset allocation/diversification cannot guarantee a profit nor protect against loss in a declining market.