Unsuitable (Unsuitability)

DEFINITION of 'Unsuitable (Unsuitability)'

A situation where an investment strategy does not meet the objectives and means of an investor. In most parts of the world, financial professionals have a duty to take steps that ensure that an investment is suitable for a client. For example, in the United States these rules are enforced by the NASD.

BREAKING DOWN 'Unsuitable (Unsuitability)'

No investment (other than outright scams) are inherently suitable or unsuitable; suitability depends on the investor's situation. For example, for a 95-year-old widow living on fixed income, speculative investments such as options and futures, penny stocks, etc are extremely unsuitable because the widow has a low risk tolerance. On the other hand, an executive with significant net worth and investing experience might be comfortable taking on those speculative investments as part of his or her portfolio.