NEW DELHI: Mutual funds diversify risk but they do not eliminate it. How? Let's understand this today.
So mutual fund invest in securities, equity or debt and the value of this fluctuates depending on the market movement. Mutual funds become risky because the NAV of a fund depends on the individual security value that the fund has in the portfolio. Now because mutual funds are well diversified across securities, the value of these securities going down one particular day is reduced. But that doesn't mean that the risk is completely eliminated. Now this is the angle in mutual funds that an investor needs to understand.
