Diversification

Building a diversified portfolio with securities spread across different investment classes can help you avoid the risk of having all of your eggs in one basket. By mixing industries and types of assets, you spread your risk. A particular market condition may have less impact if your portfolio consists of a wide assortment of securities than if you purchase only one type of security.

Most beginning investors don't have sufficient capital to properly diversify by purchasing individual securities. Investing in mutual funds allows you to buy a professionally managed, diversified portfolio with relatively small dollar amounts.

In addition, many mutual funds allow you to take advantage of dollar cost averaging by investing at regular intervals.

Mutual fund investing involves risk. Your principal and investment return in a mutual fund will fluctuate in value. Your investment, when redeemed, may be worth more or less than the original cost.