The age-old saying, "Do not put all your eggs in one basket," serves as a clear reminder of the risks involved in concentrating investments in a single asset class. Relying too heavily on a single asset class exposes a portfolio to unnecessary risks. Should that ‘basket’ drop, the entire investment could suffer.

Diversification spreads investments across various asset classes, such as stocks, bonds, and real estate, etc., to reduce risk. A diversified portfolio makes it so that even if one asset performs poorly, others may compensate, protecting both income and long-term financial stability. In an unpredictable market, diversification offers a balanced path to managing risk and achieving consistent returns.

This article explores the concept of diversification, its benefits for income generation and stability, and how mutual funds play a role in achieving a well-rounded investment portfolio.

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