A Brief Look at the Past of Mutual Funds
It is undeniable that mutual funds have become really popular nowadays. And this is not without good reason – mutual funds give the biggest return of investments if properly managed. Compared to certificates of deposit and money market accounts which offer really low interest rates, a mutual fund works for its investors in order to get maximum gains.
Investing in a mutual fund is a good way to start testing the waters. Unlike stocks and bonds where you have to learn the ins and outs before becoming really adept with it, with mutual funds all you have to do is wait for your money to grow. The fund manager will be the one responsible for spreading the funds assets over a diverse portfolio of stocks to minimize the overall risk.
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.
Nevertheless, the idea was so great that France and Great Britain acknowledged it. Soon enough, the United States followed suit. But the mutual funds of the past are very much different from what it is today. It was only during 1907, with the creation of the Alexander Fund, that the modern mutual fund began to take shape. Since then, additional changes have been included in the general concept including withdrawals on demand and semi-annual issues.
It was only with the establishment of the Massachusetts Investors Trust in 1924 that the modern mutual fund came to be. Roughly a year after the creation of the Trust, it has acquired assets totaling to almost $400,000.00 with 200 shareholders. In 1928, the fund offered its shares to the public. In the same year, another fund called the Wellington Fund was established. It was the first fund to include stocks and bonds as their investment options. Because of this the prices of stocks continued to rise making 1928 one of the most glorious years in mutual fund history.
However, in 1929, Wall Street experienced the most devastating stock market crash in the US. The prices of stocks and demand of goods fell swiftly. This was also believed to have caused the Great Depression. But despite all the gloom, one positive thing became the effect of the stock market crash ” the government finally noticed the mutual fund industry and passed laws to protect the investors.
With all the governing laws in place, the stock market regained the trust of the investors. This indicated the start of the flourishing of the mutual fund industry. By the end of the 60s, about 270 funds were around with assets amounting to $48 billion. From then on, the mutual fund industry continued to grow.
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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