Diversification, or the mixing of investments within a portfolio to manage risk, is one of the many advantages to investing in mutual funds.Buying stocks in retail and offsetting them with industrial sector stocks, for example, offers some diversification. But a truly diversified portfolio has securities with different capitalizations and industries, and bonds with varying maturities and issuers. Buying a mutual fund can achieve diversification cheaper and faster than through buying individual securities. Mutual funds also provide economies of scale. Buying one spares the investor of the numerous commission charges needed to create a diversified portfolio. Buying only one security at a time leads to large transaction fees, which will eat up a good chunk of the investment. Another reason is divisibility. $100 to $200 is usually not enough to buy a round lot of a stock, but many mutual funds come in that range. The smaller denominations of mutual funds allow investors to take advantage of dollar cost averaging. Mutual funds can be bought and sold with relative ease, making them liquid investments. And professionals manage mutual funds. They carefully research stocks and choose the ones that best match an investor’s goals. Mutual funds do pose risk, and they charge loads, fees and penalties for early withdrawals. But they have many attributes that make them a popular investment vehicle.