One of the most important pieces of advice on the stock market
is 'not to put all your eggs in one basket'. And that's exactly what a
fund achieves on your behalf. One of the main advantages of this form
of investing is the broad diversification across different
products. Those can include shares, bonds, real estate, gold or other
Adequate diversification is important in order to limit your
investment risk. For example:
Investing in a fund that itself invests across the entire real
estate sector means that if an individual construction company goes
bankrupt, it will have virtually no effect on your profit or loss. As
long as the construction sector performs well in general, you do well too.
Such diversification is usually seen as something that only
professional investors can achieve. Thanks to investment funds,
small-scale individual investors can also invest in a wide range of
shares, bonds and other instruments.