Which of the following best describes a mutual fund?

A mutual fund is best described as a pooled investment vehicle that invests in a diversified portfolio of securities. This means that when individuals invest in a mutual fund, their money is combined with that of other investors to purchase a wide range of assets, including stocks, bonds, and other securities. The primary advantage of this structure is diversification; by spreading investments across various assets, mutual funds aim to reduce the risk associated with any single investment performing poorly.

Additionally, mutual funds are managed by professional portfolio managers who make decisions about which securities to buy or sell in order to pursue specific investment objectives, such as capital appreciation or income generation. This professional management makes mutual funds accessible to individual investors who may not have the time or expertise to manage a diversified portfolio on their own.

In contrast, the other options do not accurately describe a mutual fund. A type of insurance policy is fundamentally different as it is intended to provide financial protection against risks. A government bond is a fixed-income investment that represents a loan made by an investor to a borrower, usually a government. Lastly, a single stock investment involves purchasing shares of one particular company, lacking the diversification that mutual funds offer.