What is a mutual fund?

A mutual fund is indeed an investment vehicle that pools money from various investors to purchase a diversified portfolio of stocks, bonds, or other securities. This structure allows individual investors to participate in a managed investment with a level of diversification that might be difficult to achieve on their own. By pooling funds, mutual funds can invest in a wider array of assets, which can help reduce risk and provide access to professional management.

The nature of a mutual fund is designed to meet different investment objectives, such as growth, income, or preservation of capital. Investors buy shares in the mutual fund, and their investments are collectively managed by a professional fund manager. The performance of the mutual fund is then reflected in the value of those shares.

This option accurately captures the essence of what a mutual fund is and how it operates within the financial landscape, making it the correct choice in this context.