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Final answer:
Diversification is crucial to managing risk in investment portfolios, combining various assets like stocks and bonds can optimize returns while minimizing risk.
Explanation:
Investment Portfolio Strategy and Risk Management
Diversification is key in building an investment portfolio to reduce risk. By investing in a mix of assets like stocks, bonds, and mutual funds, you spread risk and maximize returns.
When creating a $100,000 portfolio, consider your risk tolerance. A moderate risk profile might include a blend of stocks and bonds, balancing potential returns with risk.
Remember, diversification helps mitigate the impact of a single asset's poor performance, leading to more stable and potentially higher overall portfolio growth.
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