Investment portfolios are collections of financial assets like stocks, bonds, and other instruments owned by an investor to manage risk and optimize returns based on individual financial goals. Constructing a diversified portfolio helps reduce exposure to investment risk by spreading investments across various asset classes.

Investment Portfolios

Financial Assets

Stocks represent ownership shares in a company, granting shareholders a claim on part of the company's assets and earnings. They are traded on stock exchanges and their prices fluctuate based on the company's performance, investor sentiment, and broader economic factors.

Stocks

Bonds are fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental, which pay periodic interest and return the principal at maturity. They are used as a way to raise capital and are considered less risky than stocks, offering predictable income streams and diversification benefits in an investment portfolio.

Bonds

Investment risk refers to the potential for an investment to yield a lower return than expected or to result in a loss of the original capital. Understanding and managing investment risk is crucial for investors to align their portfolios with their risk tolerance and financial goals.

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