Mutual funds, a crucial part of the retirement and investment strategy of so many people and institutions today, were first introduced in the United States in 1924, by MFS Investment Management. Although not public until 1928, the very first fund, the MFS Massachusetts Investors Fund, provided a way for select investors to pool their money and potentially see greater returns. The idea behind creating this investment was to allow a group of small investors access to a range of stocks and a group of fund managers that would have otherwise been out of their price range.
Oldest Mutual Funds by Inception Date (Still Active)
|Rank||Name||Date of Creation|
|1||MFS Massachusetts Investors Fund (MITTX)||1924|
|2||Putnam Investors Fund (PINVX)||1925|
|3||Pioneer Fund (PIODX)||1928|
|4||Century Shares Fund (CENSX)||1928|
|5||Vanguard Wellington Fund (VWELX)||1929|
|7||CGM Mutual Fund (LOMMX)||1929|
|8||Fidelity Fund (FFIDX)||1930|
|9||Dodge & Cox Balance Fund (DODBX)||1931|
Why the Inception Date Is Important
When you look at a mutual fund’s performance, you have several choices. You can look at one-year performance, three-year performance, five-year performance or 10-year performance. You will also find a figure that gives the fund’s performance since inception.
But the figure for performance since inception can be deceptive. You might think you've found a fund with great returns. But if you don’t know how long the fund has been in operation, you might be looking at one that may only be a year or two old. Performance over the short term is easier to achieve than over the long term. For the funds listed above, the inception date is so far back that you have a good idea of how well it has performed for decades. A strong performance for that long suggests level-headed management and wise choices.
Should You Avoid New Mutual Funds?
While the older funds on our list are impressive for their longevity, that doesn’t necessarily mean newer funds are riskier investments.
Searching for mutual funds according to the inception date is only one way to sort through the thousands of mutual funds that are available. Additional sorting options include by risk, asset class or investment style. Good resources for mutual fund research include Morningstar, Zacks Investment Research and Yahoo! Finance. Look for the screening tool in the mutual fund section and select the characteristics you want. You may need a subscription to gain access to more advanced screening tools.
The Bottom Line
A wise investor uses several criteria to choose investments. That said, a mutual fund with longevity has apparently satisfied a lot of investors. But an older mutual fund can be stuck in its ways as well. Take a look at current management and the investment philosophy of the fund. Time marches on, and a fund with a long track record needs to adapt to current conditions, new technology, and the latest investment vehicles.
Keep your own investing horizon in mind. You are not likely to hold a mutual fund for decades, and performance over a long period may smooth out the losses that occurred during some short periods. If your horizon is short, don’t expect an older fund to match its performance since inception. Short-term swings are a fact of life in the stock market.