Connect with us

Markets

Infographic: What is a Mutual Fund?

Published

on

Infographic: What is a Mutual Fund?

What is a Mutual Fund?

The birth of the mutual fund goes all the way back to 1774, when Dutch merchant Adriaan van Ketwich first pooled the resources from a number of small investors to form a trust.

This was during a time of extreme uncertainty in the markets, and the world’s first mutual fund allowed this pool of investors to diversify across a number of European countries and American colonies. Like most other early mutual funds, it was a closed-end fund – meaning that after the first 2,000 units were purchased, participation could only occur from buying or selling shares on the secondary market.

This first fund, called “Eendragt Maakt Magt” (“unity creates strength”), lasted for 50 years and set the stage for what is now a $40.4 trillion industry globally.

The Modern Mutual Fund

Today’s infographic comes to us from StocksToTrade and it showcases the basics around mutual funds, including their history, typical structures, why people invest in them, and how fees usually break down.

A mutual fund is defined as an investment vehicle made up of a pool of money collected from many investors. A professional manager for the fund invests this capital in stocks, bonds, commodities, real estate, and other assets based on the objectives stated in the fund’s prospectus.

Unlike the very first mutual fund created in the 18th century, the most common funds today are open-ended. These funds buy back or sell their shares at the end of each day based on the net asset value (NAV) of securities, and open-end funds accounted for $16.3 trillion of assets under management (AUM) in the U.S. at the end of 2016.

Type of Mutual FundNumber of FundsAUM (U.S.)% of U.S. Industry
Open-end funds8,066$16.3 trillion86.0%
Closed-end funds530$0.3 trillion1.0%
Unit investment trusts5,103$0.1 trillion0.3%

Closed-end funds and unit investment trusts (UITs) make up the rest of the mutual fund market, and of course the fast-growing ETF sector makes up a growing piece of the wider U.S. fund industry as well.

Why Do People Invest?

As the world’s investment industry grew and matured in the 20th century, a few different factors led to people investing more in mutual funds.

Over time, investors realized they wanted easy access to diverse portfolios, daily liquidity, as well as the world’s top portfolio managers – and mutual funds can offer all of these advantages to the average investor.

Here are the basic guidelines for choosing a mutual fund:

  • Use a mutual fund cost calculator to compare how fees from various funds will impact returns
  • Evaluate portfolio managers based on their results over time
  • Comparing fund returns across a number of metrics can be important. Look at historical results, benchmark comparisons, and other funds in the peer group
  • Use online services like MorningStar to do thorough research before investing
  • Look at how well a fund is positioned for future successes
  • Read the fund’s prospectus and shareholder reports for further information

Want to learn more on different types of assets and investments?

See infographics on hedge funds, ETFs, dividend stocks, or even microcap stocks.

Click for Comments

Markets

Will Tesla Lose Its Spot in the Magnificent Seven?

We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.

Published

on

Will Tesla Lose Its Spot in the Magnificent Seven?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.

All figures are as of March 12, 2024, and are listed in the table below.

RankCompanyYTD Change (%)
1Nvidia90.8
2Meta44.3
3Amazon16.9
4Microsoft12
5Google0.2
6Apple-6.7
7Tesla-28.5

From these numbers, we can see a clear divergence in performance across the group.

Nvidia and Meta Lead

Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.

The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.

Apple and Tesla in the Red

Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.

Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.

Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.

Continue Reading
MSCI Climate Metrics Paper - A simple toolkit for climate investing

Subscribe

Popular