The History of Mutual Funds
The concept of pooling money together for investing purposes started in Europe in the mid-1800s. The first appearance of a similar fund in the United States was in 1893 when a fund was established for the faculty and staff of Harvard University. These early pooled-funds (trusts) resembled closed-end mutual funds. "The first official open-end mutual funds was born in the United States on March 21, 1924. On this day, a shoe salesman (Edward G. Leffler) and two stockbrokers (Hatherly Foster, Jr. and Charles H. Learoyd) pooled their money together in Boston, Massachusetts to form the Massachusetts Investors Trust." The Massachusetts Investors Trust grew from $50,000 to $392,000 in the first year. Growth for mutual funds was slow in the beginning, but funds gained popularity in the 1940s and 1950s. In February 2001, the mutual fund industry held $6.897 trillion in assets, according to the Investment Company Institute. Mutual funds continue to grow in popularity due to ease-of-use, liquidity, and unique diversification capabilities. 1 Mutual funds have been around much longer than most investors realize. The industry traces it's roots back to 19th century Europe. In 1868 the Foreign and C
Along with rapid growth in the mutual funds market, the 1990s also brought about changes in international funds. As foreign markets outperformed United States markets in late 1993, international funds began to grow and despite dramatic gains in United States stocks since 1994, the international funds continue to inch higher today. Despite higher gains on diversified United States funds, international funds account for approximately 22.5 of all equity fund sales. Scudder, Stevens & Clark of Boston, established the first no-load fund in 1928. With a no-load fund, shareowners pay no entry fees for their investment in the fund. By 1929, there were 21 mutual funds established with approximately $134 million in assets, but the stock market crash in October spelled trouble for every sector of the economy, including investing. The stock market crash and the Great Depression that followed prompted Congress to enact many laws to protect investors and regulate the financial markets. The first of which was the Securities Act of 1933, which for the first time required that investors be given a prospectus report. The prospectus had to clearly disclose the risks that may be involved in the purchase of mutual fund shares. The Securities Exchange Act of 1934 followed and made mutual fund distributors subject to Securities and Exchange Commission regulations. It placed mutual fund distributors under the jurisdiction of the National Association of Securities Dealers, Inc., which established advertising and distribution rules for the funds. With all the new regulations in place, mutual funds began to grow and gain popularity. The first international stock mutual fund was introduced in 1940.7 By 1951, the number of mutual fund owners had reached one million with more than 100 funds on the market. The 1950s saw the rise of industry-specific funds. These funds included the Atomic Development Fund, The Television-Electronics Fund and the Missiles-Rockets-Jets & Automation Fund. In 1952 variable annuities (insurance policies whose premiums are invested in mutual funds as a sort of savings account) were introduced. Mutual funds had their best year in 1967, reporting earnings in one quarter of 50% and average returns of 67%. Unfortunately, earnings were beefed up by using borrowed funds and some risky options. At the end of the 1960s there were 269 funds with assets totaling approximately $48.3 billion.
Some common words found in the essay are:
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Approximate Word count = 1882
Approximate Pages = 8 (250 words per page double spaced)
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