What is the main function of a mutual fund?

The primary function of a mutual fund is to pool investor resources for purchasing a diversified portfolio of securities. This pooling allows individual investors to have access to a broader range of investments than they might be able to afford on their own. By combining funds, a mutual fund can invest in a variety of asset classes, including stocks, bonds, and other securities, which helps to spread risk and potentially enhance returns.

This structure not only allows smaller investors to participate in the financial markets but also provides them with professional management, as mutual funds are typically overseen by experienced portfolio managers who make investment decisions based on research and analysis. Additionally, the diversification achieved through mutual funds can help mitigate the impact of poor performance from any single investment.

In comparison, the other options do not accurately describe the main function of mutual funds. Providing loans for real estate purchases pertains to lending institutions, offering insurance policies relates to insurance companies, and trading securities on behalf of clients is more characteristic of brokerage firms or investment advisers rather than mutual funds themselves.