The paper aims at examining the performance of Islamic Banks of Bangladesh in portfolio investment in the context of Dhaka Stock Exchange (DSE). Stocks of a total number of 26 listed companies have been purposively been selected for the study from the total number of 511 listed companies. Only secondary panel data are used to examine the three assets portfolio performance of the selected banks. Financial ratio analysis reveals that Islamic Banks offer a higher profitability and a slightly higher risk than the rest of the companies. Risk-return characteristics of Islamic Banks’ common stocks are analyzed in portfolio context through the behavior of industry weighted three stock portfolios. The investigation shows that less risky portfolios mostly consisted of any of the Islamic Banks’ stock. Therefore, the Islamic Banks’ stock has risk reducing quality in portfolio management. The existence of Islamic Banks’ stocks in the stock market as an individual stock or as a partner of a portfolio will also generate a stabilization effect to general movement of stock prices.