Having multiple assets in a portfolio does not necessarily mean being diversified.

For Mário Brandão, Head of Private Banking at Bison Bank, good diversification should spread investments across different asset classes, sectors, geographies, and currencies. It is this combination that allows for better risk management. As he explains in the article, diversification acts like an “airbag”: it does not prevent negative periods, but it can help cushion their effects.

The portfolio’s composition must also be tailored to each investor. Risk profile, goals, time horizon, and even how each person reacts to market fluctuations influence these choices. Anyone who needs the money within a shorter timeframe requires greater predictability and less volatile assets, whereas a longer horizon may allow for greater exposure to riskier assets.

Even a well-diversified portfolio should be periodically reviewed as market conditions change or as the investor approaches the time when they will need the money. Mário Brandão also warns against the risk of building a portfolio based solely on current trends and leaves three key takeaways for investors: diversify, seek a second expert opinion, and control your emotions.