What is a Diversified Mutual Fund? What are the Benefits of Investing in Them?

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What is a Diversified Mutual Fund? What are the Benefits of Investing in Them?

Top Diversified Mutual Funds: An Overview

In recent times, investments in Mutual Funds have gained significant traction, often accompanied by discussions about the importance of diversification. This article delves into the concept of diversification within Mutual Funds, highlighting its advantages, and providing insights into top-performing diversified mutual funds for potential investors.

What is Diversification in Mutual Funds?

  • Diversification is the practice of spreading investments across various assets or products, reducing the risk associated with a single investment.
  • In Mutual Funds, diversification entails pooling investments from like-minded investors and allocating them across different classes of financial instruments.
  • These instruments include Equity Mutual Funds (large-cap, mid-cap, and small-cap), Debt Mutual Funds (government securities and low-risk securities), and Hybrid Mutual Funds (mix of equities and debt instruments).
  • Diversification minimizes the risk of over-concentration in any one asset, providing a more balanced and potentially profitable investment strategy.

Benefits of Diversified Mutual Funds

Diversification in mutual funds offers a range of benefits:

Risk Mitigation: By spreading investments, risks associated with individual assets are reduced. If one asset underperforms, others can compensate, minimizing losses.

Varied Instrumental Exposure: Diversified mutual funds provide exposure to a mix of instruments, including equities, bonds, and more, enhancing the potential for balanced returns.

Industry and Regional Diversification: These funds invest across different industries and regions, reducing dependence on a single sector or geography.

Alignment with Long-Term Goals: Diversified investments can align with long-term financial goals, providing a stable foundation for wealth accumulation.

Knowledge Expansion: Investors gain exposure to different asset classes, broadening their understanding of various investment opportunities.

Reduced Monitoring Effort: Diversified portfolios require less time and effort to monitor compared to concentrated portfolios.

Top Diversified Mutual Funds

Considering different investment objectives, time horizons, and risk appetites, here are some top-performing diversified mutual funds:

Quant Active Fund - Direct Plan-Growth

Type: Multi-cap Mutual Fund

Fund Size: ₹2644.71 Cr

Expense Ratio: 0.58%

Investment Composition: Large-cap (46.84%), Mid-cap (13.87%), Small-cap (22.31%)

Risk Level: High

Suitable for: Long-term investors seeking higher returns with moderate risk tolerance.

ICICI Prudential Equity & Debt Fund - Direct Plan-Growth

Type: Aggressive Hybrid Fund

Fund Size: ₹19613.85 Cr

Expense Ratio: 1.24%

Investment Composition: Large-cap (55.55%), Mid-cap (7.38%), Small-cap (1.72%); Debt (20.03%)

Risk Level: Moderate

Suitable for: Investors looking to diversify across equities and debt securities.

HDFC Balanced Advantage Fund - Direct Plan-Growth

Type: Balanced Advantage Fund

Fund Size: ₹46130.44 Cr

Expense Ratio: 0.97%

Investment Composition: Large-cap (48.8%), Mid-cap (6.02%), Small-cap (6.2%); Debt (21.75%)

Risk Level: Moderate

Suitable for: Investors seeking a blend of equities and debt instruments.

Canara Robeco Savings Fund - Direct Plan-Growth

Type: Low Duration Debt Mutual Fund

Fund Size: ₹1060.66 Cr

Expense Ratio: 0.33%

Investment Composition: Debt (95.25%); Government securities (20.95%), Low-risk securities (74.3%)

Risk Level: Low

Suitable for: Investors seeking short-term, low-risk alternatives.

Please note: It's essential to align your investment choice with your specific financial objectives, risk tolerance, and time horizon.


Diversification through mutual funds provides a prudent approach to investing, offering a balanced exposure to various asset classes. By mitigating risks and potentially enhancing returns, diversified mutual funds are a valuable tool for achieving long-term financial goals. Remember to consider your risk appetite and investment horizon when selecting the right mutual fund for your portfolio.

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