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The first open-end mutual fund,
Massachusetts Investors Trust was founded on March 21, 1924, and
after one year had 200 shareholders and $392,000 in assets. The
entire industry, which included a few closed-end funds,
represented less than $10 million in 1924.
The stock market crash of 1929 slowed the growth of mutual funds. In
response to the stock market crash, Congress passed the Securities Act of
1933 and the Securities Exchange Act of 1934. These laws require that a
fund be registered with the SEC and provide prospective investors with a
prospectus. The SEC (U.S. Securities and Exchange Commission) helped
create the Investment Company Act of 1940 which provides the guidelines
that all funds must comply with today.
In 1951, the number of funds surpassed 100 and the number of shareholders
exceeded 1 million. Only in 1954 did the stock market finally rise above
its 1929 peak and by the end of the fifties there were 155 mutual funds
with $15.8 billion in assets. In 1967 funds hit their best year, one
quarter earning at least 50% with an average return of 67%, but it was
done by cheating using borrowed money, risky options, and
pumping up
returns with privately traded "letter stock". By the end of the 60's there
were 269 funds with a total of $48.3 billion.
With renewed confidence in the stock market, mutual funds began to
blossom. By the end of the 1960s there were around 270 funds with
$48 billion in assets. The first retail index fund was released in
1976, called the First Index Investment Trust. It is now called
the Vanguard 500 Index fund and is one of the largest mutual funds
ever with in excess of |
Articles On Mutual Fund Basics |
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$100 billion in assets.
One of the largest contributors of mutual fund growth was Individual
Retirement Account (IRA) provisions made in 1975, allowing individuals
(including those already in corporate pension plans) to contribute $2,000
a year. Mutual funds are now popular in employer-sponsored defined
contribution retirement plans (401k), IRAs and Roth IRAs.
As of April 2006, there are 8,606 mutual funds that belong to the
Investment Company Institute (ICI), the national association of Investment
Companies in the United States, with combined assets of $9.207 trillion
USD.
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