What is a key benefit of investing in mutual funds?

Investing in mutual funds offers a significant advantage through diversification of investment portfolios. When you invest in a mutual fund, your money is pooled with that of other investors to buy a diverse range of assets, such as stocks, bonds, or other securities. This diversification helps to spread risk since the performance of any single security has less impact on the overall portfolio. If one investment underperforms, others may perform well, which can help stabilize returns over time.

On the other hand, guaranteed returns are not typical in mutual funds, as they are subject to market fluctuations and investment risks. High-risk exposure is generally not an inherent feature of mutual funds; in fact, many mutual funds are designed to cater to risk-averse investors. While some mutual funds may have management fees, these are a standard part of the investment process and are used to compensate fund managers for their expertise and services. Therefore, diversification stands out as a key benefit, making mutual funds an appealing option for many investors.