Online Investing Hacks

Hacks #59-72

The first U.S. mutual fund, a common stock fund, was founded in 1924. 1940 saw mutual fund assets reach $500 million and the enactment of the Investment Company Act, which defined the framework for the regulation of the mutual fund industry. It took another 45 years for mutual fund assets to reach $500 billion. However, both the proliferation of 401(k) retirement programs and the increasingly diverse selection of financial assets available through mutual funds helped the mutual fund industry come of age in the 1990s. By mid-2003, after almost four years of poor market performance, mutual fund assets stood at almost $7 trillion.

Some investors put their investment dollars in mutual funds because that’s what their 401(k) retirement plans offer. But many more investors have invested willingly in mutual funds to obtain diversification and professional management—more easily and at lower cost than investing in individual stocks and bonds. In addition, as the pace of life has increased, plenty of people have grown fond of mutual funds as the no-muss, no-fuss investment. With professional management, many investors think that mutual funds provide good investment returns without any effort on the part of the mutual fund shareholders.

Perhaps things got a bit out of hand in the 1990s. A long bull market and steadily decreasing interest rates made just about every investment—stocks, bonds, mutual funds, real estate—look good. Potential investors looked no further than recent sky-high ...