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 Fund||Number of Funds||AUM (U.S.)||% of U.S. Industry|
|Open-end funds||8,066||$16.3 trillion||86.0%|
|Closed-end funds||530||$0.3 trillion||1.0%|
|Unit investment trusts||5,103||$0.1 trillion||0.3%|
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?
The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands
Every year, the global economy loses over $300 billion from the sale of counterfeit goods. Here are the problems created by this, and why they matter.
When you are walking along the boardwalk on vacation, you know it’s a “buyer beware” type of situation when you buy directly from a street vendor.
Those Cuban cigars are probably not Cubans, the Louis Vuitton bag is a cheap replica, and the Versace sunglasses too cheap to be the real thing.
But what if you placed an order for something you thought was truly legitimate, and the fake brand had you fooled? What if this imitation product fell apart in a week, short-circuited, or even caused you direct harm?
Can you Spot a Fake?
Today’s infographic comes to us from Best Choice Reviews, and it highlights facts and figures around counterfeit goods that are passed off as quality brands, and how this type of activity damages consumers, businesses, and the wider economy.
In 2018, counterfeit goods caused roughly $323 billion of damage to the global economy.
These fake products, which pretend to by genuine by using similar design and packaging elements, are not only damaging to the reputations of real brands – they also lead to massive issues for consumers, including the possibility of injury or death.
A Surprisingly Widespread Issue
While it’s easy to downplay the issue of fake goods, it turns out that the data is pretty clear on the subject – and counterfeit goods are finding their way into consumer hands in all sorts of ways.
More than 25% of consumers have unwillingly purchased non-genuine goods online – and according to a test by the U.S. Government Accountability Office, it was found that two of every five brand name products they bought online (through 3rd party retailers) were counterfeits.
Some of the most common knockoff goods were as follows:
- Makeup – 32%
- Skincare – 25%
- Supplements – 22%
- Medication – 16%
- Economic Impact
On a macro scale, the sale of counterfeit goods can snowball into other issues. For example, U.S. accusations of Chinese manufacturers for stealing and reproducing intellectual property has been a major driver of tariff action.
- Unsecure Information
Counterfeit merchants present higher risks for credit card fraud or identity theft, while illegal download sites can host malware that steals personal information
- Criminal Activity
Funds from illicit goods can also be used to help bankroll other illegal activities, such as extortion or terrorism.
- Unsafe Problems
It was found that 99% of all fake iPhone chargers failed to pass critical safety tests – and 10% of medical products are counterfeits in developing countries, which can raise the risk of illness or even death.
Aside from the direct impact on consumers and brands themselves, why does this matter?
The Importance of Spotting Fakes
Outside of the obvious implications, counterfeit activity can open up the door to bigger challenges as well.
The issue of fake goods is not only surprisingly widespread in the online era, but the imitation of legitimate brands can also be a catalyst for more serious problems.
As a consumer, there are several things you can do to increase the confidence in your purchases, and it all adds up to make a difference.
The Beginning of a Bitcoin Bull Run?
After 15 months of losses and stagnation, Bitcoin has made a miraculous recovery — going on a 150% bull run since its lows in December 2018.
The Beginning of a Bitcoin Bull Run?
After 15 months of losses and stagnation, Bitcoin has made a miraculous recovery — rising more than 150% from its lowest point in December 2018.
In its heyday, Bitcoin had surpassed $10,000 in early December 2017, before briefly crossing the $20,000 mark for a single day on December 17th. A year later, the digital currency had fallen back to Earth, dropping below $3,200.
Now that the dust of that wild speculative frenzy has settled, Bitcoin is back on the upswing. What could be causing this most recent surge in growth?
We look at four possible explanations for the Bitcoin bull run, as originally outlined by Aaron Hankin at MarketWatch:
Bitcoin has seen several technical milestones this year, such as surpassing the psychological barrier of $5,000 in early 2019, breaking the 200-day moving average, and scoring the golden cross (when the 50-day moving average crosses above the 200-day moving average).
Bitcoin is experiencing a steady increase in adoption across several markets. The term Bitcoin has become a household name — even if people don’t understand what it does, they know what it is.
Companies such as Starbucks, Microsoft, and Amazon, and Nordstrom are looking for ways to integrate cryptocurrencies into daily transactions for faster payment clearance, innovative rewards programs, and efficient customer service interactions.
Bitcoin has possibly seen a shift in public perception. There have been fewer negative articles about Bitcoin and cryptocurrencies, and the news stories that are negative no longer have as big of an impact as they once did.
When Binance announced hackers stole $40 million in bitcoin and when accusations of an $850-million cover-up were leveled against Bitfinex and Tether, the Bitcoin bull run barely flinched and continued to climb.
Wavering Gold Investment
Investor confidence in gold has been more stagnant in recent times. To capitalize on this, Grayscale Investments (of Digital Currency Group) posted a campaign in May 2019 promoting Bitcoin as an ideal alternative to gold because it is borderless, secure, and more efficient for storing value.
Despite the World Gold Council’s response denying those claims, the Grayscale Bitcoin Trust saw OTC Markets Group’s highest trading volumes five days later.
Where to from here?
After a long skid, it appears Bitcoin is showing signs of life again. Bitcoin’s price can be highly volatile, so it remains to be seen whether this is the beginning of a bull run, or whether this is just another bump in the roller coaster ride.
Editor’s note: The price of Bitcoin has fallen to $7,100 at time of publishing and will likely continue to experience extreme volatility. However, even at a price of $7,100, this is still a 120% increase from lows in Dec 2018. As well, an earlier version of this graphic had incorrect dates on the timeline. That has now been corrected.
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