Portfolio Composition, Diversification, and Concentration

What this video covers

• Why suitability requires a whole portfolio view, not just analysis of a new position in isolation
• How a position that passes step one (position alone) can fail step two (portfolio context) by duplicating existing risk
• Why Regulation Best Interest allows a risky-looking hedge to be suitable for a risk-averse customer when it reduces total portfolio risk
• The precise difference between concentration (few issues, large commitment) and diversification (spread across many issues)
• Why issue count alone does not prove diversification when investments share a sponsor, industry, or geography
• What correlated risk looks like in practice: five private placements from one sponsor behaving as one concentrated position
• Where firm written concentration policies fit into the recommendation review, especially caps on illiquid and speculative positions