What are mutual funds?

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. This structure allows investors to gain access to a variety of investments, which helps spread risk. When individuals invest in a mutual fund, they purchase shares of the fund, and their money is combined with that of other investors to create a larger pool of capital. Fund managers then use this capital to make investment decisions on behalf of all the shareholders.

The advantages of mutual funds include professional management, liquidity, and the ability to invest in a diversified portfolio with a relatively small amount of capital. This diversification helps to mitigate risk, as the performance of the fund is not solely reliant on a single investment. Given this context, the choice that describes mutual funds accurately emphasizes their nature as investment vehicles that aggregate resources for a broad range of investments.