What is the function of a mutual fund?

The function of a mutual fund is to pool money from multiple investors to buy various securities. This mechanism allows investors to diversify their portfolios, as the funds collected are used to invest in a wide array of assets such as stocks, bonds, or other financial instruments. By pooling resources, individual investors gain access to a larger and more diversified selection of investments than they might be able to achieve on their own, which can help reduce risk and improve the potential for returns.

This pooling approach is particularly beneficial for those who may not have the expertise, time, or capital to directly manage a diverse investment portfolio. Additionally, mutual funds are typically managed by professionals who make decisions based on research and analysis, furthering the investment strategy and optimizing the performance of the fund for shareholders.