What do mutual funds invest in?

Mutual funds invest in a diversified portfolio of various securities, which includes a mix of stocks, bonds, and other financial instruments. The diversification aspect is key because it spreads out risk, making mutual funds a popular choice for investors who want to mitigate their potential losses. By pooling money from many investors, a mutual fund can achieve a level of diversification that might be challenging for individual investors to accomplish on their own. This approach helps to balance the potential for higher returns with the risks associated with investing in the financial markets.

While some of the other options may involve investment types that certain funds could include, they do not capture the essence of what a mutual fund typically offers. For example, investing in a single stock does not align with the fundamental principle of mutual funds which is diversification. Similarly, mutual funds do not exclusively focus on government bonds or real estate properties; rather, they can include a broad range of investments to suit different risk profiles and investment strategies.