**Core Concept**
The patient's presentation of hypopigmented patches around hair follicles with fine scaling, which coalesced later, is suggestive of a fungal infection, specifically tinea versicolor. This condition is caused by the overgrowth of yeast (Malassezia) on the skin, leading to a disruption in melanin production and the characteristic hypopigmented macules.

**Why the Correct Answer is Right**
Tinea versicolor is a common dermatological condition that can be diagnosed through a simple potassium hydroxide (KOH) preparation. The KOH preparation helps to break down the cellular components of the skin, allowing for the visualization of the yeast under a microscope. This is a rapid and cost-effective method for diagnosing tinea versicolor, and it is especially useful in cases where a biopsy is not feasible.

**Why Each Wrong Option is Incorrect**
**Option A:** Wood's lamp examination is used to diagnose conditions such as vitiligo, albinism, and certain fungal infections, but it is not the primary diagnostic tool for tinea versicolor.
**Option B:** Biopsy is a more invasive procedure that may be necessary in cases where the diagnosis is unclear, but it is not the first-line investigation for tinea versicolor.
**Option C:** Culture of the affected skin may be used to diagnose fungal infections, but it is not the most practical or cost-effective method for diagnosing tinea versicolor.

**Clinical Pearl / High-Yield Fact**
Tinea versicolor is a common condition that can be prevented by maintaining good hygiene, avoiding excessive sweating, and using gentle skin care products. It is also more prevalent in warm and humid climates.

**Correct Answer:** D. KOH preparation.