Mutual funds give people the opportunity to save money through the stock market. They are an ideal way to avoid the complications of picking individual stocks and are managed by some of the best financial minds in the world. I'm going to talk a little about the history of mutual funds, some benefits of them, and some statistics of how they have done in the market over the years.
So what exactly are mutual funds? A mutual fund is a single investment that contains a portfolio of individual stocks or fixed income securities, such as bonds. They allow investors to pool their money and let professional money managers make the specific investment decisions.
The first mutual fund was started in 1822 in the Netherlands and the second in Scotland in the 1880s.
They were originally called investment trusts.
The first American mutual fund was established in 1889 and was called the New York Stock Trust.
By the end of the 1920s there were 10 mutual funds and by the end of the 1960s there were 244. Today there are more than 6,500 unique funds.
The great thing about mutual funds is that they are very diverse. One can select funds that invest in government securities, precious metals, bonds, real estate, or any combination of investments.
You can start with as little as $50, although $2000 is a more common minimum. Money can be easily transferred from a savings or checking account to buy more shares or you can automatically buy more shares with the earnings that your fund receives.
Mutual funds allow easy access to your money. They have 1-800 numbers available 24 hours a day and often allow next day wire transfers of money to your bank.
They have professional management and there is no sales commission.