How to Assess Risk Levels in a Diversified Portfolio
Building a diversified investment portfolio is a fundamental strategy for managing risk while seeking returns. However, even within a diversified portfolio, understanding and assessing the overall risk is essential for maintaining a healthy balance between growth and protection. Without a clear understanding of the risk exposure, investors may be vulnerable to unexpected losses or missing opportunities for greater returns. This article will explore how to assess the risk levels in a diversified portfolio and how to tailor it to meet your financial goals. Understanding the Concept of Portfolio Risk Portfolio risk refers to the potential for losing money or failing to meet investment objectives due to market volatility, interest rate changes, or economic downturns. A diversified portfolio typically contains different asset classes, such as stocks, bonds, real estate, and commodities. The idea behind diversification is that the portfolio's overall risk is reduced by holding assets th...