The History Of Mutual Funds Shows A Consistent Rise In Popularity
The history of mutual funds is definitely not exclusive and unique to America and it was not started in this country either. In 1822 in the Netherlands, the first mutual fund was created and then it was followed later by Scotland in the 1880's when the second fund came into being. In 1889, the New York Stock Trust was the first mutual fund in America, followed later in the 1920's when one started in Boston. Most of the mutual funds that came after that time actually were started in Boston, including Fidelity, the Putnam Fund, and the State Street Fund.
In 1924, the Massachusetts Investors Trust (which is now called the MFS) was founded and by the end of a full year, the company had $392,000 in assets and 200 shareholders who invested their money. The market for mutual funds grew tremendously by the end of that year and there was a combined value of $10 million put into this new kind of investment. With the crash of the stock market in 1929, mutual funds ceased to be as popular, but as one of the benefits of this disaster in United States history, investors were given certain guarantees by the government.
After the crash, there was much stronger legislation and liability so that investors could once again feel safe to invest their money. Acts and laws were passed after 1929 that gave investors complete disclosure about the mutual funds, the managers, and the safety of the securities and with that, people became more confident and the mutual fund market began to grow again. Proof of the renewed confidence is that there were $48 billion in assets and 270 different mutual funds at the end of the 1960's.
It was during the 1960's that there was a tremendous growth because people were investing in much riskier funds, which obviously earned the most money when they were successful. There were over 100 funds that were placing their money into technology stocks and other risky ventures but investors were satisfied because they were making money. At the end of this short era, though, in around 1969, people began to get dissatisfied because their money wasn't doing so well anymore and people were afraid that they'd never get their money back. The market was suffering tremendously with unemployment, sky-high inflation rates, and investors took their money out of the mutual funds. Then, in the 1970's, a new type of mutual fund emerged that was called a 'no load' fund. This type of mutual fund had no sales commission and the money that investors earned went straight to them, and not to salespeople or managers. Since the year 1940, there has not been one case of a mutual fund becoming bankrupt, and although people may be intimidated by the large amount of mutual funds available from which to choose, investors should be aware that they can be a very safe and lucrative place to put their money. Each fund has it benefits and detriments but choosing wisely and making an informed decision can have yield great profits in the years to come.
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