What is a primary benefit of investing in a mutual fund as opposed to individual stocks?

Investing in a mutual fund offers the significant advantage of diversification of assets. This means that when you invest in a mutual fund, your money is pooled with that of other investors and allocated across a wide range of securities, such as stocks, bonds, or other assets. This diversification helps to mitigate the risks associated with investing in individual stocks, as it reduces the impact of any single investment's poor performance on the overall portfolio.

By spreading investments across various sectors and asset classes, mutual funds can help investors achieve a more stable return over time. The larger the number of holdings within the mutual fund, the less likely it is that the decline of one security will influence the overall performance significantly. This built-in diversification is especially beneficial for individual investors who may not have the resources or expertise to effectively manage a diversified portfolio on their own.

In contrast, options that involve higher risk exposure or direct control over individual stocks do not provide the same level of risk management. Lower management fees, while an important aspect when considering fund options, do not inherently provide the benefits of diversification that mutual funds do. Thus, the primary benefit of investing in a mutual fund compared to individual stocks lies in its capacity to diversify investments, ultimately leading to a balanced risk and potential for more consistent