History of mutual funds

History of mutual funds

For many investors, the choice of possible investments can be overwhelming. There are stocks, bonds, commodities, securities and lots of other choices. One of the most popular choices is mutual funds. These diverse and complex investments have become one of the most popular ways to invest and Americans have been taking part in mutual fund investing for many, many years.

 

The first ever mutual fund, known as the Massachusetts Investors Trust was born in 1924, but the idea of a group of investors pooling their money together for one big investment goes back even farther. Evidence of this style of investing can be traced back toEuropein the mid-1800s. The staff and faculty atHarvardUniversitywere the first group to do it in theUnited Statesin 1893. It was this group investment that went on to become the very first mutual fund inUShistory.

 

To say that this first mutual fund was successful would be an understatement. The fund, which started out with 200 investors and a starting point of $50,000 dollars, grew to a value of almost $400,000 in the matter of a single year. If only every investor could get that kind of return!

 

To compare those numbers to today, there are approximately 10,000 different mutual funds available right now, representing 83 million investors inside theUnited States, making mutual fund investing one of the most popular and wide-spread forms of investing in theUS.

 

The rules of investing in mutual funds changed dramatically after the great stock market crash of 1929. The Securities & Exchange Commission (SEC) was born, and with the help of two key pieces of legislation, the Securities Act of 1933 as well as The Securities Exchange Act of 1934,the government would take a pivotal role in trying to protect potential investors from getting ripped off. The SEC requires that companies file their financial information with them, so that investors can see which companies are healthy and are ready to grow, and which companies to stay away from.

 

The creation of the SEC did wonders for consumer confidence in mutual funds, and by the 1960’s the mutual fund market had exploded. There were an estimated 270 different mutual funds that anyone could invest in with a value of about $48 million dollars.

 

As you can see, mutual fund investing has had its ups and downs, and while a well run mutual fund is likely to make money, remember, there are no sure things in the investment world and you should always be careful when trusting someone with your hard earned money.