How Mutual Funds Started

You might be hearing a lot about mutual funds and are wondering why it is a popular investment opportunity. Investors prefer to invest in mutual funds over traditional forms of investments such as certificates of deposit and money market accounts because of one thing ” the amount of return it brings to them. With a properly managed mutual fund, you can expect the biggest return of your investment.

Aside from traditional investment options such as money market accounts and certificate of deposits, a mutual fund is one investment opportunity a novice can take part of. Stock markets and bonds are good investment options, but not all people have the time to learn the ins and outs of the trade. Thus, a mutual fund is perfect for a beginner as it allows you to test the waters before putting a huge amount of money in. A good advantage of mutual funds is the fact that it spreads its assets over several investment vehicles to minimize risks.

To fully understand the concept of mutual funds, it is important that we take a look at its history. Some historians believe that it was a Dutch merchant named Adriaan van Ketwitch who conceived the idea of mutual funds. But others believed that that the mutual fund concept started in the Netherlands when King William I launched his closed-end investment companies.

Nonetheless, Great Britain and France recognized how sound the investment opportunity is and established mutual fund companies in their respective countries. The United States caught up with these countries only in the 1890s. The mutual fund of today is very much different from the mutual funds of the past. But the establishment of the Alexander Fund in Pennsylvania paved the way for the modern version of the mutual fund. In the following years, features like the ability to do withdrawals on request and semi-annual issues were added.

It was only when the Massachusetts Investors Trust was established that the modern mutual fund came into existence in 1924. And about a year later, the Trust has grown to acquire almost $400,000.00 in assets with 200 shareholders. By 1928, the fund went public. In the same year, the Wellington Fund was established and was the first one to include stocks and bonds in their investments. Because of this, the value of stocks increased rapidly making 1928 one of the best years in the history of mutual funds.

Not long after came the Wall Street Crash of 1929. This was the worst stock market crash in history, which led to the Great Depression. But one positive thing emerged from these downtimes. Finally, the government noticed the advantage of the mutual fund industry and subsequently passed several laws to protect the investors.

With these laws enacted, the investors slowly renewed their confidence in the stock market which made the mutual fund industry flourish again. The rest they say is history. From the 60s to the 90s mutual funds continue to catch the publics attention. But this is just the beginning.

Today, the mutual fund industry has gained recognition from the different countries all over the world as more people realize its benefits. And with so much to gain, the mutual fund industry will continue to become a popular investment vehicle for investors in the years to come.

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