What is typically found in a diversified investment portfolio?

A diversified investment portfolio is designed to spread out risk by incorporating a variety of asset types. This typically includes a combination of stocks, bonds, and mutual funds. The rationale behind diversification is that different asset classes tend to perform differently under various market conditions. By holding a mix of assets, an investor can minimize the risk of a total loss due to the poor performance of a single investment.

For instance, stocks might offer high growth potential, but they also come with increased risk. On the other hand, bonds are generally more stable and can provide a steady income stream but often have lower returns compared to stocks. Mutual funds allow investors to gain exposure to a diversified collection of stocks or bonds within a single investment, further contributing to overall portfolio diversification. This strategic blend helps in managing volatility and achieving a balanced financial strategy over the long term.