What is a 'mutual fund'?

A mutual fund is indeed an investment vehicle that consolidates money from numerous investors to buy a variety of securities, such as stocks, bonds, or other assets. This collective approach allows individual investors to access a diversified portfolio, which might otherwise be challenging for them to achieve on their own due to high capital requirements. The pooling of resources is managed by professional investment managers who make decisions based on the fund’s objectives and goals, aiming to maximize returns for all the investors involved.

This option highlights the essence of mutual funds—their role in enabling everyday investors to partake in diversified investment schemes while leveraging professional management. In contrast, the other choices describe different financial concepts, such as retirement accounts, loans, and market indices, which do not capture the nature and purpose of a mutual fund.