Investments in mutual fund gives diversification of portfolio.......

[jiten702]

An investor can reduce risk by investing money across companies, sectors and asset class. You can reduce your risk by holding portfolio of securities than holding single security because in that case your profit or loss entirely depend on that one security. When you buy a particular equity scheme, indirectly you are diversifying the same amount across different securities as normally one scheme invests across 20-30 stocks of different sectors which is practically not possible for individual investor. So by investing in mutual fund, you are not putting all your eggs in one basket.