Which of the following statements about mutual funds is TRUE?

Mutual funds are designed to pool money from multiple investors to collectively invest in a diversified portfolio of securities, such as stocks, bonds, or other assets. This pooling allows individual investors to access a wider range of investments and diversification that they may not be able to achieve on their own, significantly lowering risk. By joining together, investors can benefit from economies of scale, reduced transaction costs, and professional management of the fund.

The other statements do not accurately reflect the nature of mutual funds. They are not insurance products; they do not guarantee returns as their performance is subject to market fluctuations; and while some mutual funds may invest in real estate, many focus on a variety of other asset classes, so they do not exclusively invest in that sector. Understanding the core principle of pooled investments is fundamental when studying mutual funds.