Which term refers to a fund that pools assets and sells/redeems its shares?

• A. Bonds
• B. Proportional Tax
• C. Savings
• D. Mutual Fund

Answer: (D)

Pooling investors' money to create a diversified portfolio and issuing shares that can be bought and redeemed describes a mutual fund. A mutual fund collects money from many investors, pools it, and uses that capital to buy a diversified mix of assets. The fund sells shares to investors, and those shares represent a portion of the fund’s holdings. Investors can buy more shares or redeem existing ones, typically at the net asset value per share calculated daily. This arrangement provides diversification and professional management with relatively small individual investments. Bonds are individual debt instruments, a proportional tax is a tax structure, and savings is simply money set aside—none of these describe a fund that pools assets and issues redeemable shares.