When Was the First Mutual Fund Established?
Mutual funds are actively managed pools of securities. Investors buy shares in the fund to participate in the income and profits generated by the securities held by the fund. The modern open-end mutual fund has been around for quite a while and the original open-end mutual fund is still in existence.
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History
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Historians believe the first closed-end funds, where only a set number of shares are issued, started in Holland or Belgium in the 1820s. Closed-end funds next started in Switzerland, in 1849, and spread throughout Europe. The first closed-end funds appeared in America in the late 1800s. These early funds invested directly in businesses and did not trade on the stock exchanges.
Open-end mutual funds, where new fund shares are created as investors add money, started in the United States in the 1920s. They grew in popularity, but fell out of favor after the market crash of 1929. Popularity returned after World War II and exploded in the 1980s and 1990s.
The First Fund
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The first modern open-end mutual fund in the United States was the Massachusetts Investment Trust, started in March 21, 1924. The fund still exists today and is managed by MFS Investment Services. The stock market symbol of the fund is MITTX and in mid-2009, its top holdings were JP Morgan Chase and Johnson & Johnson.
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Regulation
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The U.S. Securities and Exchange Commission was formed in 1933 to protect investors. The Securities Exchange Act of 1934 and the Investment Company Act of 1940 put in place regulations that govern mutual funds today and provide protection to mutual fund investors.
Other Firsts
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The Wellington Fund, started in 1928 and now part of the Vanguard Group, was the first fund to hold both stocks and bonds. The first index mutual fund was started by Vanguard in 1975--the Index 500. The SPDR S&P 500 ETF, symbol SPY, launched in 1993 was the first of the now very popular exchange-traded funds, or ETFs.
Size
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From the first fund in 1924, mutual funds have grown in popularity. According to the "2009 Investment Company Fact Book," after World War II, there were just 73 mutual funds. The number passed 1,000 in 1983, 5,000 in 1994 and today there are more than 8,000 mutual funds from which investors can choose.
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