What is a mutual fund?

A mutual fund is best described as an investment vehicle made up of a pool of money collected from many investors to purchase securities. This means that multiple investors contribute funds into a common account, which is then managed by professional fund managers. These managers are responsible for selecting a diversified portfolio of stocks, bonds, or other securities based on the mutual fund's investment objectives.

This structure allows investors to access a diversified investment strategy without needing to pick individual stocks or bonds themselves, which can be risky and time-consuming. By investing in a mutual fund, individuals benefit from economies of scale and professional management, making it an appealing option for those looking to invest in the financial markets without extensive knowledge or time to manage their investments actively.

The other options do not accurately reflect the nature of a mutual fund; therefore, they do not capture the essence of this investment type. A mutual fund is much more complex and collective than a single investment type or a simple savings account, both of which lack the pooled resources and active management aspect that defines a mutual fund. Similarly, a loan from a bank does not pertain to investment in securities, thus highlighting the unique characteristics of mutual funds as collective investment vehicles.