All of the investments held by an individual or mutual fund or other entity are referred to as that person or entity's portfolio.

These investments can range from securities to cash to real assets held for the purpose of preservation, growth, or income; essentially anything that is part of a long-term financial strategy that is held separate from daily operations and cash flow can be considered part of a portfolio. The gains and losses of all the singular investments held are totaled up to find the overall return of the portfolio.

Mutual funds each have a portfolio of their own. A person investing in mutual funds can create a portfolio out of these portfolios, and indeed some mutual funds called funds-of-funds create portfolios using other mutual funds. The distribution that is chosen between different types of investments is referred to as the Asset Allocation of a portfolio.

An Asset Allocation is chosen with a goal and time horizon in mind, and an efficient asset allocation will maximize gains while minimizing risk, within the spectrum of tolerable risk for each portfolio-owner.

The most theoretically efficient portfolios are plotted on a risk-return graph, and this line is called the Efficient Frontier. If you can generate gains above that line while experiencing less risk/volatility, you have "beaten the market" essentially, since the Frontier graph uses composites of major indices.

Diversification across various exposures, a smart Asset Allocation, and a rebalancing strategy are the key components of most portfolios.

What Should I Compare the Performance of My Portfolio With?
How Often Do I Need to Rebalance My Portfolio?