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In a paragraph explain how the creation of a portfolio reduce risk? What type of assets...

In a paragraph explain how the creation of a portfolio reduce risk? What type of assets should be included in a diverse portfolio? Why should they be included?

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ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Portfolio reduces the risk through the benefit of diversification.

Diversification means a reduction in the overall risk of the portfolio when 2 or more stocks are present in the portfolio. The overall risk of the portfolio is less than its weighted average risk of Individual stocks in the portfolio.

how can an investor have a diversified portfolio and what types of assets should be chosen?

As per modern portfolio theory. There is a Benefit of diversification of risk when non-perfectly correlated assets are added in the portfolio.

The benefit of diversification is when non perfectly correlated assets are added then if the return of one asset falls then it's offset by a rise in the return of another asset.

They should be included because it provides a better reward to risk ratio.

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