Financial Institutions, Markets, and Money, Eleventh Edition

CHAPTER NINETEEN

Investment Companies

IN 2009, MORE THAN 50 million U.S. households, representing 87 million people and 43 percent of the households in the United States, owned mutual funds, according to the Investment Company Institute. The median age of a mutual fund owner is 50. Seventy-six percent of mutual fund owners are married or living with a partner, and 47 percent have a college degree. The median financial assets of this group are $150,000, and, at retirement age, 99 percent wish they had saved or invested more.

Okay, we made up the last statistic, but just about everyone wishes he or she had saved or invested more when they were younger. As a college student, you are probably relatively young and will soon face decisions about how much to spend versus how much to save and invest. As we will learn in this chapter, mutual funds hold more assets than any other type of financial institution in the United States. Therefore, if you don't already own any mutual fund shares, it is probably just a matter of time. In fact, the sooner you begin learning about and using mutual funds, the sooner you will accumulate wealth in them. For example, if you begin investing $675 a month (about $22 a day) in a mutual fund that earns 8 percent per year, compounded monthly, after 5 years, you will have accumulated $49,597. After 10 years, you will have accumulated $123,489; after 20 years, $397,589; and after 30 years, you're a millionaire ($1,005,992)! Clearly, the sooner you invest and ...