A mutual fund is a good way for an investor to diversify in investment because:
A) a mutual fund consists of a large number of stocks so the cost of buying all of them at the same time is lower.
B) when the prices of risky stocks go up, the prices of less risky stocks must go down.
C) not all stock prices move up or down at the same time.
D) there are many buyers of a mutual fund so that the risk is spread across all the buyers.

Question

Quizplus · Accepted Answer

A mutual fund invests in a diverse range of stocks across different sectors, which helps to spread the risk across multiple stocks. As not all stock prices move up or down at the same time, investing in a mutual fund helps to reduce the volatility of an investor's portfolio. Additionally, mutual funds allow for smaller investments, which can provide investors with access to a more diversified portfolio than they would be able to achieve through purchasing individual stocks.

A Mutual Fund Is a Good Way for an Investor