Mutual Funds for the Utterly Confused

When I wrote about mutual funds in my book “Mutual Funds for the Utterly Confused - McGraw-Hill 2008“I mentioned the very first mutual fund. Opening its doors to investors in 1924, Massachusetts Investor Trust became the first mutual fund. Until that moment, a stock could only be purchased by certificate - yes they issued paper - and this made access to markets for the average investor expensive and difficult.

Mutual funds have used this fund as a template for how they give investors access to stocks and bonds across a broad range of companies and for a reasonable price (expenses for this fund run around 0.85%). Keep in mind, although innovators tried to open an index fund but the need for vast calculations made these types of funds inaccessible for another fifty or so years.

For those of you interested in this fund, it has taken a beating along with the rest of the market - which is the point Chuck Jaffe is trying to make. It isn’t the fund - it is the markets that go down, dragging the fund with it.

We sometimes place too much emphasis on the skills of the fund manager. This is often not fair. They must, under many circumstances, try and bail water while keep the ship headed in the right direction and do this, while investors stage a mutiny. Not to mention, he or she must attract new investors at the same time. In many instances, it would be like selling a house that is on fire.

For brief moment, revel in the birthday celebration of this historic fund and its achievement over the last 85 years. And even if things are not appearing to be the same, they sometimes can be if we are patient enough to wait.