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Why Should You Invest In A Diversified Fund

Why Should You Invest In A Diversified Fund, what is the safe way of investment, important things about diversified equity funds.
Why Should You Invest In A Diversified Fund, what is the safe way of investment, important things about diversified equity funds.
Why Should You Invest In A Diversified Fund

Since we know that investment in mutual fund is subject to market risk and so it is necessary to take step to minimize the risk. And so there is a need of investment in diversified fun. 
In diversified equity funds, there are different schemes which diversify among sectors on the basis of market capitalisation of stocks, and the schmes invest across diverse sectors.

What is a Diversified Equity Fund?

A diversified equity fund is a category of mutual funds which invests in stocks of companeis across multiple sectors and sizes. A diversified fund portfolio is made in such a way that the poor performance of a particular sector or stock does not impact the entire portfolio.

A fund can diversify by investing in:

  1. Multiple sectors: A diversified fund can invest in various sectors like banking chemicals, pharmaceuticals, FMCG, automobiles, etc.
  2. Multiplee sizes: A fund can also diversify on the basis of market capitalization, viz large caps having huge market capitalization, mid caps with medium capitalizations or small caps, with small market capitalizations. 

Important things to know about Diversified Equity Funds:

  • There is an professional fund manager who make the portfolio in such a way that poor performance of one sector does not impact the entire portfolio. 
  • Since the portfolio of a diversified equity scheme invests across multiple sectors, the poor performance of one sector is offset by the superior returns generated by other sectors. 
  • Since diversified schemes have the option to invest in multiple sectors, the fund manager has the discretion of shifting funds from non performing sectors to performing ones. 
Over the years, the performance of Diversified equity funds has been very good. Investors are getting good return from diversified equity funds.
Diversify your investment to minimize Risk.

Read More Related Articles on Mutual Funds:
Indian mutual fund basics
Why Should You Invest In A Diversified Fund, what is the safe way of investment, important things about diversified equity funds.

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