What makes mutual funds a diversified investment option?
A mutual fund may not be able to meet the investment objectives of all unit holders through just one portfolio. Some unit holders may want to invest in risk-bearing securities such as equity, while others may want to invest in safer securities like bonds or government securities. Moreover, there are so many varying risks associated with different securities that it is often impossible for one individual to manage them. Therefore, a mutual fund tries to create different classes of risk portfolios by formulating different investment schemes. Each investment scheme specifies the kind of investments the scheme will make out of the monies collected.
