Mutual funds pool money from investors to purchase portfolios of investments.

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The question states: Mutual funds pool money from investors to purchase portfolios of investments.

Option 1: True. This statement reflects the core function of mutual funds. Investors pool their money, and a professional manager uses that pool to buy a diversified portfolio of securities such as stocks, bonds, or money market instruments. The pooling mechanism allows individuals to access diversified holdings that they might not be able to achieve on their own, with the fund’s portfolio ownership shared proportionally among investors.

Option 2: False. This would be incorrect because it contradicts the fundamental definition of mutual funds. While some investment vehicles may pool money for other purposes, mutual funds are specifically designed to gather funds from many investors to create a single diversified portfolio, managed by a fund manager. Claiming that mutual funds do not pool money ignores the basic structure and purpose of these funds.

If you think about the mechanics of mutual funds, the pooling feature enables diversification, professional management, and liquidity for shareholders. The statement provided aligns with that standard description, whereas labeling it as false would contradict the conventional understanding of how mutual funds operate.

BUSFIN 1200 AU2025 (2014) Final Exam- Requires Respondus LockDown Browser

Mutual funds pool money from investors to purchase portfolios of investments.

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