What does an 'investment portfolio' consist of?

An investment portfolio comprises a mixture of financial assets such as stocks, bonds, mutual funds, and other securities. This diversity allows investors to spread their risk across various investment types, which can lead to more stable returns over time. The goal of having a varied portfolio is to balance risk and reward, ensuring that if one type of investment performs poorly, others may perform better, helping to protect the investor’s overall financial position.

While a single type of investment may be beneficial in certain circumstances, it does not provide diversification. Similarly, focusing solely on real estate or cash reserves limits the potential for capital growth and may not take full advantage of the benefits associated with different asset classes. Thus, a well-constructed investment portfolio is fundamental for individuals looking to build wealth and achieve financial goals.