Which of the following is a characteristic of a mutual fund?

A mutual fund is designed to pool money from multiple investors to invest in a diversified portfolio of assets, which is one of its primary characteristics. This diversification helps to reduce risk, as it spreads investments across a wide variety of securities, such as stocks, bonds, or other assets. By holding a range of investments, mutual funds can potentially protect investors from the volatility of a single asset and provide a more stable return over time.

The characteristic of diversification is crucial because it allows investors, especially those with less capital or experience, to gain exposure to a broader market without having to purchase each security individually. This can lead to improved risk management and the potential for returns that align more closely with the overall market performance.

In contrast, high management fees can be a concern but are not universally applicable, as fees vary greatly among different funds. Investing in a single stock would be contrary to the purpose of a mutual fund, which aims to provide broad exposure. While some mutual funds offer liquidity, it may not always be immediate depending on market conditions and fund structure. Thus, the clear aspect of mutual funds that stands out is their characteristic of diversification.