Which type of funds invest in other funds instead of buying securities directly?

Portfolio funds are designed to invest in other funds rather than directly purchasing individual securities such as stocks or bonds. This approach allows for greater diversification and asset allocation flexibility since investors gain exposure to a variety of underlying investments through the portfolio fund's overarching structure.

Investing in other funds, which might include equity funds, bond funds, or money market funds, allows for a mix of asset classes and potentially lowers risk through diversification, as the performance of the portfolio fund is based on the collective performance of the underlying funds.

In contrast, bonds would focus on fixed-income securities; index funds aim to replicate the performance of a specific market index by investing directly in the individual securities of that index; and growth funds primarily seek capital appreciation by investing in stocks believed to have the potential for significant growth, focusing on individual securities rather than a collective fund approach. This distinction underscores why portfolio funds are uniquely positioned to utilize a multi-fund strategy.