History Of Mutual Fund Analysis
The history of mutual fund analysis probably began in 1924 when the very first mutual fund was created by three Boston securities executives when they pooled their money together to form Massachusetts Investor Trust. The 200 individuals who put up the original seed money of $50,000 certainly did some mutual fund analysis before they invested their hard earned money. This very first mutual fund put a big smile on the face of those 200 investors in the first year by increasing the assets to $392,000.
The Stock Market Crash Of 1929
There almost were not any mutual funds remaining for analysis after the crash heard around the world happened in 1929. This has turned out to be the worst financial event ever to affect people all around the world.
Four years later in 1933 Congress passed the Securities Act and, one year later, the Securities Exchange Act. These acts required that each mutual fund be registered with the Security Exchange Commission and prospective investors are given a prospectus. A prospectus is an excellent tool in mutual fund analysis because it provides information about the mutual fund's costs, investment objectives, risks, and past performance.
Today
Today in the US there are over 10,000 mutual funds available for analysis if you have the time. These mutual funds are collectively worth more than 7 trillion dollars divided by 83 million investors.
Every one of these 10,000 mutual fund companies are required to provide potential investors with a prospectus and also comply with the detailed guidelines contained in the Investment Company Act of 1940.
Investment Company Act Of 1940
This act went a long way in installing confidence in the investor when he invested in mutual funds. The new law set separate standards by which investment companies should be regulated. The act's purpose as stated in the bill was to protect the national public interest as well as the interests of the investor.
The act regulated conflicts of interest in mutual funds and security exchanges. The act of 1940 aided the person in mutual fund analysis because he was now provided with material details about each mutual fund company.
Individual Retirement Account (IRA)
The single biggest event to affect the profession of mutual fund analysis occurred in 1981 when the Individual Retirement Act was passed. This act allowed individuals who were already enrolled in a corporate pension plan to invest up to $2000 in a mutual fund. Now these people started to do their own mutual fund analysis instead of paying a broker for their opinion. In their own minds they felt they could own a small piece of a large number of companies.
