Which investment option allows for diversification effectively?

Utilizing mutual funds to pool resources is an effective investment option for achieving diversification because mutual funds are designed to invest in a broad range of securities. By pooling money from many investors, mutual funds can purchase a diversified portfolio that includes various asset classes such as stocks, bonds, and other securities. This diversification reduces the risk associated with individual investments since the overall performance is not reliant on the success of a single security. If one investment performs poorly, the impact on the entire portfolio can be mitigated by the better performance of other investments within the fund.

In contrast, other options such as investing solely in corporate stocks, exclusively in high-risk assets, or concentrating investments in a single industry limit diversification. Those strategies increase exposure to specific market segments or risks, which can lead to greater volatility and potential losses if those particular investments do not perform well.