Nowadays, the idea of having a mutual fund is one of the most popular ways to invest your money into stocks, bonds and other money market instruments. This investment scheme works by having different investors allocate their money into a fund wherein a fund manager or portfolio manager will work on trading the fund to attain interest. The manager is also responsible for collecting the dividends or interest earned by that fund. After collecting the dividend, each of the investors will have their share on this dividend depending on the amount of investment that they allocated for the fund.

In the history of mutual funds, the most popular story was from the year 1924, when three executives gathered their money together and used it for investment. But even before that year, the concept of gathering money from different persons to allocate for an investment was already a practice. It was believed that during the 1800s, Europe started this kind of investment scheme. In the United States, the concept of mutual fund could be traced from the year 1893 when the faculty and staff of Harvard University pooled their money together. However, it was only in the year 1924 that mutual fund was formalized.

The date that mutual fund became official was on March 21, 1924. It was the day that could be considered as the birth date of the first mutual fund. During that year, they called it as Massachusetts Investors Trust. A year after the launch of the first official mutual fund, they had a huge growth in assets. From $50, 000 they grew to a whopping $392, 000 by the next year. This huge growth came from about two hundred shareholders.

The success of mutual funds continued until the year 1929 when the industry experienced a downfall in the stock market. Because of this downfall, the growth of mutual funds slowed down. Because of this incident, the United States Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934, stating that funds should be registered with the Securities and Exchange Commission (SEC) and to provide the investors with a prospectus, which contains all the information about the fund, securities and the fund manager. After these Acts by the Congress, the SEC helped in creating the Investment Company Act of 1940. This is an important guideline being followed by funds until today.

After several years of struggling and with the help of the rules created by the Congress and SEC, stock market began to perform well again and with that, the performance of mutual funds started to bloom. At the end of the year 1960, the assets of about 270 funds were at 48 billion dollars.

In the year 1981, mutual fund had their huge growth because of Individual Retirement Account (IRA) provisions made in that year. This provision allowed more people to contribute to a mutual fund since they allowed corporate pensioners to contribute $2, 000 a year. This provision made way for different employer-sponsored contribution retirement plans.