In finance, what does the term "portfolio" refer to?

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The term "portfolio" in finance refers to a collection of various investments held by an individual or an institution. Portfolios are designed to manage risk and return through diversification, which involves spreading investments across different asset classes, such as stocks, bonds, and real estate, among others. By holding a diversified portfolio, investors aim to reduce the overall risk of their investments while still seeking to achieve returns.

Investors often choose to create portfolios to align with their financial goals, risk tolerance, and investment time horizon. The performance of a portfolio is assessed based on the combined performance of its individual investments, making portfolio management a critical aspect of effective financial strategies.