Which type of investment company is known for providing a diversified portfolio of stocks and bonds?

A mutual fund is designed specifically to provide investors with a diversified portfolio of stocks and bonds. By pooling money from multiple investors, mutual funds can buy a wide range of securities, which helps reduce individual investment risk through diversification. This allows investors to participate in broader market movements without needing to select individual stocks or bonds themselves.

Mutual funds offer various types of investment strategies and can focus on different sectors, asset classes, or regions, catering to a wide range of investment objectives. Investors in mutual funds benefit from professional management, as a fund manager is responsible for making investment decisions on behalf of the fund’s shareholders.

In contrast, hedge funds typically employ more complex strategies and are not primarily focused on providing diversified portfolios to the general public. Exchange-traded funds (ETFs) also provide diversified portfolios and are similar to mutual funds, but they trade on exchanges like stocks, which can create different tax implications and trading dynamics. Brokerage firms, on the other hand, do not invest in securities themselves but facilitate the buying and selling of securities for clients.