What is a mutual fund?

A mutual fund is an investment vehicle that aggregates capital from numerous investors to create a diversified portfolio of various securities, such as stocks and bonds. This pooling of resources allows investors to collectively benefit from a range of investment opportunities that they might not have access to individually, especially in terms of diversification and professional management.

In a mutual fund, professional fund managers make investment decisions on behalf of the investors, aiming to achieve specific financial goals based on the fund's objectives. This allows investors to partake in a more organized approach to investing, where risks can be spread across different assets and sectors, reducing the impact of volatility from any single security.

The other options describe distinct financial instruments or entities that do not share the characteristics of a mutual fund. Bonds are fixed-income securities; bank accounts serve as savings vehicles with guaranteed returns; and real estate investment trusts focus on investing in income-producing real estate. None of these options encapsulate the collective investment strategy inherent in mutual funds.