What defines a mutual fund?

A mutual fund is defined as an investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. This collective investment allows individual investors to participate in a broader market than they might be able to on their own. By pooling resources, mutual funds provide access to professionally managed portfolios, which often include a significant diversification that helps to mitigate risk.

In contrast, the other options do not accurately describe mutual funds. Individual stocks managed by one person represent a more specific investment strategy and do not encompass the collaborative nature of mutual funds. A loan provided to a company aligns more closely with debt instruments and financing, rather than the investment mechanism of mutual funds, which focus on equity or similar investments. Lastly, while both mutual funds and exchange-traded funds (ETFs) are investment vehicles, they are distinct in structure and trading. ETFs are traded on stock exchanges like individual stocks, whereas mutual funds are typically bought directly from the fund company at the end of the trading day. Thus, the definition provided in the correct answer captures the essence of what mutual funds are and how they function in the investment landscape.