People who are interested in asset formation may have heard the term “portfolio” somewhere.
A portfolio refers to the breakdown of assets that you hold. It is a visualization of how much money is allocated to each asset.
We’ve talked about the importance of diversified investing before, but it’s not just about “investing in multiple stocks.”
The original purpose of creating a portfolio is to mitigate risk. Risks vary depending on the individual products. Basic risk management is done by combining high-risk and low-risk products.
By the way, in investing, “risk” refers to the fluctuation in returns. In fact, even when returns are unexpectedly high, it is considered a risk in investing.
Generally, low-risk products do not generate surprising returns. If such a thing happens, it’s possible that a large risk was hidden and unnoticed. In other words, you may have come close to losing a significant portion of your assets.
The goal of a portfolio is to minimize fluctuations in profits and losses as much as possible.