Portfolio Theory is a financial concept that helps investors understand how to allocate their assets to maximize returns while minimizing risk. It suggests that by diversifying investments across different assets, such as stocks, bonds, and real estate, investors can reduce the overall risk of their portfolio. The idea is that not all assets will perform poorly at the same time, so spreading investments can lead to more stable returns. Developed by Harry Markowitz in the 1950s, Portfolio Theory emphasizes the importance of considering both the expected return and the risk associated with each investment. By analyzing the correlation between different assets, investors can create an optimal portfolio that balances risk and reward, ultimately leading to better financial outcomes.