Putting $200,000 into one oil well means a lot depends on that one well producing.
A fund can take that same capital and spread it across 20, 30, or even 40 horizontal wells.
You may have a small interest in each one.
Maybe 7% in one well, 3% in another, and 9% in another.
Now your investment is connected to production from many wells instead of relying on just one.
If one well underperforms, the others are still part of the portfolio.
That is the idea behind diversification in an oil and gas fund.
You are not removing risk. You are spreading it across multiple wells.
Save this if you're trying to understand how oil and gas funds work.