Although it is uncertain, many trace the creation of the first mutual fund back to Dutch merchant Adriaan Van Ketwich. In 1774 Van Ketwich introduced the fund, which he called Eendragt Maakt Magt ("unity creates strength"). The new closed-end fund allowed potential investors to purchase shares in the fund until all of the 2,000 available units were sold. Once the fund was full, the only way to gain access to the fund's holdings was to purchase units from an existing shareholder. Van Ketwich's fund also included an annual accounting statement which shareholders could request to view at any time.

This model of mutual fund began to gain popularity in western Europe throughout the late 1700s and through the 1800's, eventually reaching the shores of America in the 1890s. The first American closed-end mutual fund came in 1893 with the creation of the Boston Personal Property Trust. The modern mutual fund was also born in Boston, in 1924 with the introduction of the Massachusetts Investors' Trust, which was the first mutual fund with an open-end capitalization, allowing the fund to continuously issue and redeem its shares. After only one year of existence the fund's popularity was obvious; The fund's holdings grew from $50,000 to over $390,000. The fund was also the first of its kind to go public in 1928. That same year saw the introduction of the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of investments in business and trade. (To learn more, read A Brief History Of The Mutual Fund.)

  1. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  2. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  3. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  4. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
  5. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  6. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
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