Which best describes a mutual fund?

A mutual fund is best described as a collection of investments managed by a financial advisor. This means that a mutual fund pools money from multiple investors to create a diversified portfolio of stocks, bonds, or other securities. The fund is managed by professional portfolio managers who are responsible for selecting the investments within the fund, with the goal of maximizing returns while managing risk.

Investors benefit from this approach because they gain access to a diversified portfolio that would be difficult or expensive to replicate on their own. By investing in a mutual fund, individuals can invest in a range of assets, which helps to spread risk across different sectors or asset classes. This makes mutual funds an effective choice for many investors seeking growth potential without the need to personally manage their investments day-to-day.

In contrast, other choices do not accurately reflect the nature of mutual funds. For instance, a single investment in a highly volatile stock would not provide the diversification that a mutual fund offers. An automatic savings account with fixed interest refers to a different financial product that focuses on saving rather than investing. A loan that helps purchase securities also does not characterize a mutual fund since it does not involve pooling and managing investments.