Why would I want a diversified portfolio, versus throwing my investments into an index fund?

When you diversify your investments, you reduce the amount of risk you’re exposed to in order to maximize your returns. Although there are certain risks you can’t avoid such as systematic risks, you can hedge against unsystematic risks like business or financial risks.

Why are mutual funds considered high-risk?

Mutual Funds invest in securities, be it equity or debt, whose values fluctuate along with market movement. This makes them risky because NAV of the fund depends on the individual security values held in the fund’s portfolio.

Is a mutual fund considered high-risk?

Mutual funds are a lucrative investment option for investors looking for tax-efficient returns that are typically higher than alternatives such as fixed deposits. Although mutual funds are generally considered a reliable investment, there are high-risk and low-risk categories within it as well.

Are mutual funds are the riskiest type of investment?

Mutual funds are the riskiest type of investment.