In a mutual fund, the money collected is used primarily for what purpose?

In a mutual fund, the primary purpose of the money collected is to buy diversified securities. This means that the funds from investors are pooled together and managed by a fund manager who invests in a variety of financial instruments, such as stocks, bonds, or other securities. The goal of this diversification is to spread risk across different asset classes and individual investments, which can help to enhance potential returns while reducing the impact of any single investment's poor performance on the overall fund.

Investors typically choose mutual funds because they offer a way to achieve diversification easily without needing to buy each individual security themselves, which can be capital-intensive and time-consuming. Additionally, by investing in a mutual fund, individuals can benefit from professional management and expertise that may not be available if they were investing independently.

This focus on buying diversified securities contrasts with the other options presented. While mutual funds can indeed be instrumental in retirement planning or investment strategies, their core operation revolves around the purchase and management of a diverse portfolio of investments.