balanced portfolio

When grouped together, one’s investments are called a ‘portfolio.’ A balanced portfolio is one that holds a variety of different types of investments. For example, some stocks, bonds, real estate and gold (perhaps). The idea is that when one goes down in value, another part of the portfolio will go up. The best example of this is when stocks go down, safe government bonds tend to go up. At this point, investors can sell some of the bonds that have made money and re-invest the proceeds in the stocks that have sold off. When the opposite happens, investors can sell stocks and buy some more bonds. The idea is that investors a) maintain the portfolio balance that is right for their risk (e.g. more stocks if they want to take more risk) and b) can, over time, benefit from volatility as things are sold when at relatively high prices and bought when at relatively low prices.