History of Mutual Funds (Investment Trusts)

Mutual funds started to get popular in the 1980s - 90s when investors saw their returns skyrocket from these investment vehicles. The idea of pooling assets together for investment purposes, and generating return from these pool of investments has been around since the 18th century. Some possible origins of mutual funds are:

Launch of closed-end investment firms by King William I in 1822 in Holland
Creation of an Investment Trust by Adriaan van Ketwich in 1774. His fund was known as "Eendragt Maakt Magt" which means "Unity Creates Strength." Van Ketwich believed that by pooling investments together and minimizing risk, more of the poor and middle class investors will be encouraged to also invest.
Mutual funds or investment trusts were created in 1849 in Scotland and in Scotland in the 1880s.
The first closed-end mutual fund was created in USA by Boston Personal Property Trust in 1893.
The first modern mutual fund known as the Alexander Fund was created in the state of Pennsylvania in 1907.

The Modern Mutual Fund

The first modern mutual fund was created in 1924 in Boston, Massachussets. Known as Massachusetts Investors' Trust, the fund went public in 1928 and eventually led to the founding of MFS Investment Management firm. Some of the innovators involved in this transformation included Richard Paine, Richard Saltonstall and Paul Cabot.

By the year 1929, there were 700 closed-end funds with 19 open-ended mutual funds. Thanks to the 1929 stock market crash, closed-end funds lost their popularity and small open-end funds started to skyrocket. In 1933, the Securities and Exchange Commission (SEC) was created to protect the investments of consumers in mutual funds. Mutual funds must be registered with the Securities and Exchange Commission (SEC) before they can be invested into.

The 1950s saw the popularity of mutual funds expand even more. The open-ended funds grew from just 19 in 1929 to over 100 funds by 1954. In the 1960s, we witnessed the growth of aggressive growth mutual funds. This meant billions of more dollars being invested by Americans.

In 1971, William Fouse and John McQuown working at the Wells Fargo bank created the first index mutual fund which would then grow into The VanGuard Group known for its low price index mutual funds. Furthermore, the 1970s also witnessed the growth in the popularity of no-load funds.

Some Interesting Facts

The first Korean Mutual Fund known as Mirae Asset Park Hyun-joo Fund was created in December 1998.
As of today, there are more than 20 trillion Korean money (roughly about $19.32 Billion US) invested in Korean mutual funds.
There are more than 10,000 mutual funds out there in the US at the moment.