Microsoft Corporation (NYSE: MSFT) was formed in 1975 by Bill Gates and Paul Allen, as they rushed to create an operating system for the Altair 8800 microcomputer.
The Altair 8800 was arguably the first microcomputer that kicked off the computer revolution, and with it came Altair Basic, a licensed version of Microsoft Basic. Microsoft Basic was the company's first licensed commercial product, as it licensed various versions to Apple Computers (NASDAQ: AAPL), Commodore, and IBM (NYSE: IBM). Revenues for the company totaled just $16,005 in 1976.
- Microsoft is one of the largest companies in the world, and maker of such products as Windows, Office, and Xbox.
- MSFT shares command a market capitalization of around $2.3 trillion, making it a top component of the S&P 500 and other major indices.
- Here, we look at some of the top mutual fund holders of MSFT, which unsurprisingly are also the largest index funds around.
Microsoft's most popular brands include Windows, Office 365, Bing, MSN, Skype, Exchange, and cloud applications Azure, SQL Server, and .NET.
The Microsoft Tipping Point
The iconic tipping point came when IBM was planning to launch a personal computer but lacked an operating system. While Microsoft did not have an operating system, Bill Gates successfully bluffed IBM to win the contract on Aug. 12, 1981. Rather than program one from scratch, Gates negotiated a deal to purchase the 86-DOS product from Seattle Computer Products for less than $100,000 and licensed it to IBM for a royalty fee on every PC it would produce. The IBM PC launch turned out to be an unprecedented success, catapulting Microsoft's gross sales to $55 million in 1983. Microsoft launched the first iteration of its Windows franchise in 1985.
The company went public in 1986 at $21 per share. Since then, Microsoft has grown into a consistently strong revenue performer and one of the largest companies in the world by market cap.
Microsoft's most popular brands include Windows, Office 365, Bing, MSN, Skype, Exchange, and cloud applications Azure, SQL Server, and .NET. It also produces the XBOX video game system and has agreed to purchase video game giant Blizzard/Activision. Microsoft is a component in the big three benchmark indexes: Dow Jones Industrial Average (DJIA), Standard and Poor's 500 (S&P 500), and the Nasdaq-100 index.
Here are the four largest mutual funds invested in Microsoft stock.
1. The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Microsoft's top mutual fund holder is the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). The fund holds more than 213 million shares with a market value of more than $78.6 billion as of Dec. 31, 2021.
The VTSAX provides broad exposure to the U.S. stock market with $2873 trillion in assets under management (AUM). The VTSAX has a five-year annualized return of 16.4%, and the fund's expense ratio is 0.04% as of year-end 2021.
The VTSAX has a minimum initial investment amount of $3,000, but Vanguard also offers an exchange-traded fund (ETF) called the Vanguard Total Stock Market ETF (VTI). The VTI is similar to the total market fund but only costs the price of one share as an initial investment.
2. The Vanguard 500 Index Fund Admiral Shares (VFIAX)
Microsoft's second-largest mutual fund holder is the Vanguard 500 Index Fund Admiral Shares (VFIAX), which holds more than 158.5 million shares for a market value of $53.3 billion as of Dec. 21, 2021.
The Vanguard 500 tracks the Standard and Poor's 500 Index (S&P 500) by investing in 500 of the largest U.S. companies across various sectors. With $272 billion in assets under management, the VFIAX has earned a five-year annualized return of 17.1%. The fund has an expense ratio of 0.04% through the end of 2021.
The minimum investment requirement for Vanguard's VFIAX is $3,000, but an ETF version is available called the Vanguard S&P 500 ETF (VOO). Although the holdings within the VOO ETF are similar to the VFIAX, it has a lower initial investment requirement, which is the cost of one share.
3. The SPDR S&P 500 ETF (SPY)
The SPDR S&P 500 ETF Trust (SPY) is Microsoft's third-largest mutual fund holder of the company's stock. Managed by State Street Global Advisors, the SPY tracks the S&P 500 Index. The SPY ETF owns nearly 79.5 million shares for a market value of approximately $24.5 billion as of Dec. 31, 2021.
The SPY has $412billion in assets under management and an expense ratio of .0945%. The fund's five-year annualized return is 17.2% through the end of 2021.
4. The Fidelity 500 Index Fund (FXAIX)
The Fidelity 500 Index Fund (FXAIX) is Microsoft's fourth-largest mutual fund holder. The Fidelity 500 tracks the S&P 500 Index with $387.1 billion in assets under management. The FXAIX owns more than 79.7 million shares of Microsoft, representing nearly $25 billion in market value as of March 31, 2021. Fidelity's FXAIX has no investment minimum, an expense ratio of .015%, and its five-year annualized return is 17.1% as of Dec. 31, 2021.