ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diversification. Diversification, or the mixing of investments and assets within a portfolio to reduce risk, is one of the advantages of investing in mutual funds. A diversified portfolio has securities with different capitalizations and industries and bonds with varying maturities and issuers.

Detailed explanation-2: -Balanced funds are mutual funds that invest money across asset classes, including a mix of low-to medium-risk stocks and bonds. Balanced funds invest with the goal of both income and capital appreciation.

Detailed explanation-3: -Mutual funds reduce risk through portfolio diversification. A fundamental concept in modern portfolio theory in finance is that diversification reduces an investor’s exposure to non-systematic risk. Diversification, however, is costly for individual investors due to high transaction costs.

Detailed explanation-4: -Mutual funds offer the investors the advantages of professional management and diversification. Diversification means that your investment risk is spread out. In addition, because your fund buys and sells larger blocks of securities at one time, its costs are lower than those typically paid by an individual.

Detailed explanation-5: -Mutual Fund Schemes are not guaranteed or assured return products. Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal.