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The Rise of the Mutual Fund – An Historical Perspective

Have you ever considered where the mutual fund came from? It is rather interesting considering that long term stock investors once picked individual stocks and bought them. Many bought 20 or even 30 different stocks to diversify. Back then they kept the stocks for 20, 30, sometimes 50-years, and they made a bundle over time too. Of course, it takes a lot of time to buy individual stocks, especially before eTrade type companies existed.

Then along came the mutual fund, where a manager picked a bunch of really good stocks and you bought into the fund, which bought the individual stocks. Later these mutual funds started specializing in certain industries and sectors. By the 1985 things were really going and by 1998 Mutual Funds had grown by a factor of 10 to some 5.5 Trillion Dollars and within a few more years to 10 Trillion Dollars,

Back then it was companies like Janus, Fidelity, Vanguard and American Funds leading the charge, and there was no stopping that train. Eventually there were families of funds covering everything from high-risk startups to international emerging markets, and everything in between covering you name it under the sun. So, where are Mutual Funds today?

Well, they are still at the top of the investment advisor’s or financial planner’s recommendations for portfolio allocation and diversification, perhaps now more than ever. Of course, ETFs are the new big thing and yet, the good old mutual fund is hard to beat and so it lives on as one of the greatest investment vehicles of our time. I thought you might like to have a little bit of history and understand what it is you are investing in. Think on this.

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