What is the purpose of a mutual fund?

Question

A. Guaranteeing a fixed return on investment
B. Pooling money from multiple investors to invest in a diversified portfolio
C. Trading individual stocks on behalf of investors
D. Investing only in government bonds

Answer 1

The correct answer is B. Pooling money from multiple investors to invest in a diversified portfolio.

Mutual funds are designed to gather money from various investors and invest it collectively in a diversified range of securities, which can include stocks, bonds, and other assets, to minimize risk and potentially enhance returns.