History Of Mutual Fund Families
Mutual fund families are the array of mutual funds offered by a single mutual fund company. The different types of mutual funds offered will vary by the risk and investment objectives of each. The advantage of mutual fund families is that they appeal to a larger group of investors, thus increasing the client base.
There is a whole spectrum of fund choices available to investors including funds that focus on small growth companies, international companies, technology companies, large value companies, and emerging markets
The Beginnings
The history of mutual funds began in 1924 when the very first mutual fund was created by three Boston securities executives when they founded the Massachusetts Investor Trust. In only one year the assets of the company grew from $50,000 to $392,000.
Over the next five years, mutual fund families began to be offered by investment companies. The over-confident investor was allowed to borrow money to invest in the market at a two to one ratio. That meant if he had $100 cash to invest, he could borrow $200 more to invest. This type of loose financial activity, with no regulation, caused the greatest financial turmoil ever to occur in the world to happen: the crash of 1929.
Securities Act And Securities Exchange Act
These two acts, passed in 1933-34, required that each mutual fund and/or investment company be registered with the Securities and Exchange Commission. It also required that each company had to produce a prospectus and make it available to every potential investor. This prospectus should provide information about the company's costs, investment objectives, risks, and past performance.
Families of mutual funds, offered by investment companies, got a big boost in value and consumer confidence when the Investment Company Act of 1940 was passed. This new law set separate standards by which investment companies should be regulated. The act's purpose stated in the bill was to protect the national interest as well as the interests of the private investor. It assumed the power to act as a regulator in disputes between investment companies and security exchanges. Now the average citizen had a course of action if he felt he got cheated by an investment company.
The Future
The future of mutual fund families looks to be terrific in the long run. Today, just in the U.S., there are over 10,000 mutual funds, a majority of which are being offered in mutual fund families.
One of the biggest reasons for the success of investment companies that offer mutual fund families is that for a small investment you can own a small share of a lot of different companies.
