What type of organization buys stocks and bonds and sells shares in those securities to the public?

The correct answer is mutual funds, as they are investment vehicles that pool money from multiple investors to buy a diversified portfolio of stocks, bonds, or other securities. This structure allows individual investors to hold shares in a much broader selection of investments than they could individually afford or manage, providing opportunities for diversification and professional management.

Mutual funds are designed to cater to retail investors looking to gain exposure to a range of asset types while spreading their risk across multiple securities. The fund issues shares to the public, which represent ownership in the portfolio of securities that the fund holds. Investors buy shares in the mutual fund, thus obtaining a proportional interest in the underlying assets.

In contrast, hedge funds typically cater to accredited or institutional investors and may employ more aggressive strategies, such as leveraging or short selling. Insurance companies focus on risk management and underwriting, investing primarily to meet future obligations rather than to sell shares of the underlying assets to the public. Brokerage firms act as intermediaries that facilitate the buying and selling of securities between investors and the market but do not typically create a pooled investment product like mutual funds do.