What does pooling of funds mean in the context of investments?

Pooling of funds in the context of investments refers to the practice of combining resources from different investors to create a larger capital base for investment purposes. This approach allows individual investors to access a broader range of investment opportunities that they may not be able to afford on their own.

By pooling funds, the combined money can be used to purchase a diversified portfolio of assets, such as stocks, bonds, or other securities, which reduces risk through diversification. This collective investment strategy enables smaller investors to benefit from professional management and potentially higher returns that might otherwise be out of reach for them individually.

The other options describe specific investment activities that do not encompass the broader concept of pooling funds. Investing in single stock options or buying bonds exclusively reflects a focused investment strategy rather than a combined effort among multiple investors. Trading commodities refers to dealing in physical goods rather than pooling financial resources for investment purposes.