What is Diversified Mutual Fund?

Mutual fund diversification is an investment strategy that helps to manage unsystematic risks involved in the investment. The ultimate goal of diversifying mutual funds is to reduce risks involved in the investment. This will help to achieve higher returns on an average with minimal risk. Visit Investology by Edelweiss.in for a complete guide about mutual funds - https://www.edelweiss.in/investology/...

Diversification plays a major role when it comes to investing. Mutual funds are the easiest way to achieve diversification as well as asset allocation without in-depth knowledge of each asset class. Investing in mutual funds that invest in different asset classes such as equity, debt, and gold, will help to spread risks among these. A sudden change in any macroeconomic condition will not change your portfolio value drastically. There are different types of mutual funds which can be used to diversify your investment portfolio, these are given below

1. Equity Mutual Funds - These funds make investment in the equity market. You can choose funds on basis your financial goals and risk appetite. Also, you can choose whether to invest in one or combination of large-cap, mid-cap, small-cap and multi-cap funds. It is crucial to ensure that whichever fund scheme you choose invests across industries and asset classes

2. Debt Mutual Funds - These are the funds that invest in debt securities such as corporate bonds, money market instruments, treasury bills, etc. These funds offer high liquidity and is capable to yield higher returns over an extended period of time. Also, debt mutual funds are tax efficient when kept for more than 3 years

3. Balanced Mutual Funds - These are known as hybrid funds that invest in both equity and debt. These are best suited for investors who do not wish to take on equity related risks

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