Mutual Funds

Index Funds

How do mutual funds provide for diversification?

By their nature, mutual funds provide diversification, even within their specialty segments, because they hold many different investment instruments that may or may not be correlated. Some investments may go up and others may decline, but overall, the portfolio manager wants the portfolio to be sufficiently diverse that its performance is positive, exceeding its peers (other similar mutual funds) and “the market” at large. If some of its positions are not performing well, this can be offset by others that are doing well, providing investment diversity.


This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App