Which of the following statements about mutual funds is TRUE?

Mutual funds pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. The correct statement about mutual funds is that they can be a good investment option for diversification. By investing in a mutual fund, individuals can spread their risk across a variety of assets, rather than putting all their money into a single investment. This diversification can help reduce the overall risk of an investment portfolio, as different assets may perform differently under varying market conditions.

In contrast, mutual funds do not guarantee high returns; market fluctuations and the performance of the underlying assets influence the returns. Many funds do not necessarily offer high commissions, and fees can vary significantly among different funds. Lastly, mutual funds are generally considered better suited for long-term investments rather than short-term gains. While some investors may look to mutual funds for quick profits, the nature of mutual fund investments typically aligns with a long-term investment strategy aimed at growth or income over time.