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Mutual Funds are an excellent way to diversify your investment portfolio.
Let's suppose you're just getting started as an investor and have Rs.5,000 to invest and you have three important goals you want to achieve. First, you don't want to lose your money in a risky venture so you want security, like that found in a certificate of deposit or other fixed income investment. But you also want to make the most money you can, so you want the prospect for growth potential, too. Finally, since you don't have the time or knowledge to actively manage your money, you want professional money management -- occasionally diversifying your investments into promising new opportunities. That sounds like a very good plan, but where can you invest your money and have a chance to meet all three criteria? Certificates of deposit and other fixed income investments offer security, but often with low rates of interest and a fixed potential for growth. Individual stocks may carry greater potential for growth, but Rs.5,000 isn't a lot to invest and if you put it all in one stock, you risk everything if it performs poorly.
