l in relation to load funds, all no load funds are not necessarily a better deal than all load funds.
Most mutual funds are regulated investment companies. As regulated investment companies, mutual funds are required to pay federal income tax only on earnings not distributed to shareholders. Thus, the practice is for a mutual fund to distribute all or nearly all earnings to shareholders.
Many desirable investments are not directly available to the small investor because of the requirements for a large initial investment of funds. Through the pooling of the funds of many small investors, however, mutual funds make otherwise unavailable investments available to the small investor. Mutual funds also tend to limit risk for individual investors through the diversification of holdings. Highly specialized mutual funds, however, may not limit risks as well as some potential investors may assume.
Mutual Funds: History and Development
Mutual funds began just after the end of the First World War. The mutual fund concept was based on assumptions that many investors would prefer to place the responsibility for their investments in the hands of professional managers, and that investors would be attracted by the capability of mutual funds to effectively diversify relatively small investments. From these beginnings, the mutual fund market in the United States had increased in size to more than $1.3 trillion by 1991 and to $1.8 trillion by 1993.
Mutual funds are regulated by several agencies of the federal government through the Investment Company Act of 1940. The principal regulating agency is the Securities and Exchange Commission. The extension of brokerage rights to commercial banking institutions has brought the Federal Reserve System and the Comptroller of the Currency into the regulatory picture for mutual funds.
Globalization of business activity has been closely followed by an increasing globalization of financial ma...