What is the term for a pooled investment that holds a diversified portfolio of stocks from different industries?

• A. Hedge Fund
• B. ETF
• C. Bond Fund
• D. Mutual Fund

Answer: (D)

A pooled investment that holds a diversified portfolio of stocks from different industries is a mutual fund. It gathers money from many investors and uses it to buy a broad mix of securities, typically spanning many companies and sectors. This diversification helps spread risk and provides professional management, so individual investors don’t have to pick and manage a wide array of stocks themselves.

Hedge funds are private and often pursue aggressive, less regulated strategies; a bond fund concentrates on bonds rather than stocks; an ETF also pools money and diversifies, but it usually tracks an index and trades on public exchanges, whereas many mutual funds are actively managed and priced based on their net asset value at the end of the day.