What is Mutual Funds?

 

Origin

The first modern investment funds (the precursor of today's mutual funds) were established in the Dutch Republic. In response to the financial crisis, of 1772–1773, Amsterdam-based businessman Abraham formed a trust named Eendragt Maakt Magt ("unity creates strength"). His aim was to provide small investors with an opportunity to diversify.

The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund market until 1987, when a host of other government-controlled Indian financial companies established their own funds.

What is Mutual Funds?

Mutual funds pool money from the investing public and use that money to buy other securities, usually stocks and bonds. Mutual funds are operated by professional money managers, who allocate the fund's assets. 

Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities at a low price. 

Practical Life Example

One of the most famous mutual funds in the investment universe is Fidelity Investments' Magellan Fund (FMAGX). This fund became famous when Peter Lynch served as its portfolio manager. 

Even after Lynch left, Fidelity's performance continued strong, and assets under management (AUM) grew to nearly $110 billion in 2000.