Page 21 - Banking Finance September 2024

ARTICLE

Introduction to

Mutual Funds

Mutual funds have become one of the most popular investment vehicles globally, providing investors
with a diversified, professionally managed, and relatively accessible means to grow their wealth.
This article delves into the history and evolution of mutual funds, both globally and in India, and
offers an overview of the various types of mutual funds available today, highlighting their unique
characteristics and suitability for different types of investors.

M utual funds have become one of the most In the 19th century, mutual funds gained popularity in
popular investment vehicles globally, providing
Europe, particularly in Scotland and France. However, it
investors with a diversified, professionally
managed, and relatively accessible means to grow their wasn't until the early 20th century that mutual funds
began to emerge in the United States, which is now the
wealth. This article delves into the history and evolution largest market for mutual funds globally. The creation
of mutual funds, both globally and in India, and offers of the Massachusetts Investors Trust in 1924 marked the
an overview of the various types of mutual funds available beginning of the modern mutual fund industry in the U.S.
today, highlighting their unique characteristics and This fund is considered the first open-end mutual fund,
suitability for different types of investors. meaning it could issue and redeem shares at any time,
providing liquidity to investors.
History and Evolution of Mutual Funds
The concept of mutual funds dates back to the late 18th The mutual fund industry in the United States
century, with the first recorded instance being in 1774 experienced significant growth following the Great
in the Netherlands. An Amsterdam-based businessman, Depression and the subsequent implementation of the
Adriaan van Ketwich, is credited with creating the first Investment Company Act of 1940. This Act established
mutual fund, aiming to provide small investors with an regulations for mutual funds, ensuring transparency and
opportunity to diversify their investments. This fund, protecting investors, which helped to build trust in the
named "Eendragt Maakt Magt," or "Unity Creates industry. The post-World War II economic boom and the
Strength," pooled resources from multiple investors to rise of the middle class further fueled the growth of
invest in a diversified portfolio of securities, reducing the mutual funds, making them a mainstream investment
individual risk. option.

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