Investors can potentially increase their returns while reducing the negative effects of a single underperforming investment on their portfolio as a whole by diversifying their holdings. A variety of profile pattistocks, bonds, properties, mutual funds, & other investment vehicles can be found in a diversified portfolio. People can possibly earn higher returns while managing risk by combining different asset classes in their portfolio, as each one has unique risk and return characteristics. Individuals can benefit from varying market circumstances and economic cycles by increasing their diversification.