Portfolio theory is a financial concept that helps investors make decisions about how to allocate their money across different assets, such as stocks and bonds. The main idea is to create a mix of investments that balances risk and return. By diversifying their investments, individuals can reduce the overall risk of their portfolio while still aiming for a good return. The theory emphasizes that not all investments move in the same direction at the same time. By combining assets that respond differently to market changes, investors can achieve a more stable performance. This approach is often associated with Harry Markowitz, who introduced the concept in the 1950s.