Mutual FundA mutual fund is essentially a type of collective investment scheme professionally managed that pools money from a variety of investors and invests in a wide range of financial market instruments and securities. A mutual fund is handled by a fund manager that trades the pooled resources on a regular basis. Each year, net proceeds and losses are then computed with the resulting outcome typically being distributed among the investors according to their stake on the fund.

Mutual Fund Brief History

Mutual funds first caught on with investors sometime during the 1980’s and the 1990’s. It was during this time that most mutual funds enjoyed record highs, giving investors record returns. But it has since evolved into something that may be considered quite different from what mutual funds were then as different types were developed over the years.

Mutual funds may actually have a long history despite its popularity only surging during the recent decade. Although the actual origin may not be ascertained, many historians believe that the idea behind mutual funds were rooted in ancient Dutch investment instruments which appeared sometime in the late 1700’s to the early 1800’s. The idea of pooling resources together from different investors to spread the risk eventually caught on in the markets of Great Britain and France. Mutual funds eventually made its way into the US sometime during the 1890’s.

US Modern Mutual Fund

The modern mutual fund in the US arrived with the launch of the Massachusetts Investors Trust in 1924. It the led to the introduction of other similar mutual funds but only represented less than $10 million in terms of investment. The growth of the mutual funds was hindered by the stock market crash in 1929. The market crash further led to the establishment of rules and regulations regarding securities and investments.

The stringent rules eventually led to renewed confidence on mutual funds that allowed then to blossom by the 1960’s. It was sometime in 1975 that a change in the Internal Revenue Code allowed individuals to open Individual Retirement Accounts or IRA’s aside from their company sponsored pension plans. This further fueled the growth of mutual funds.