Final answer:
When securities represent a majority of an investor's total assets, the investor is considered to have a concentrated portfolio. A diversified portfolio consists of a wide range of securities from different companies or asset classes, which helps to reduce risk by spreading investment across various holdings.
Step-by-step explanation:
When securities represent a majority of an investor's total assets, the investor is considered to have a concentrated portfolio. A concentrated portfolio is characterized by a high degree of exposure to a particular security or a small number of securities.
This can be risky because if any of those securities perform poorly, it can have a significant impact on the overall portfolio. On the other hand, a diversified portfolio consists of a wide range of securities from different companies or asset classes, which helps to reduce risk by spreading investment across various holdings. A diversified portfolio is recommended to mitigate the potential downside of individual investments and achieve more stable returns over time.