While 2024 was a year of notable events, it also marks a significant milestone in the financial world: the 100th anniversary of the mutual fund. Mutual funds were born in 1924 with the Massachusetts Investors’ Trust, a groundbreaking effort to bring the benefits of investing to ordinary Americans. Fast forward a century, and mutual funds have transformed the financial landscape, becoming a cornerstone of savings and investment for roughly 120 million Americans. Congress has the unique opportunity to strengthen mutual funds further, ensuring a secure retirement is within reach for every American.
Even in the past year, mutual funds have shown their enduring appeal, with 2.3 million Americans opening new accounts. What was once the exclusive privilege of the wealthy – roughly 4 million Americans owned stock in 1900 – is now widely available. Thanks to low expense ratios and access to modern technology, mutual funds have never been more approachable for first-time investors and those looking to save for retirement.
Nowhere is the impact of mutual funds more profound than in retirement savings. A staggering 87% of mutual fund investors cite retirement as their primary savings goal through their 401(k)s, highlighting the critical role these funds play in helping Americans secure their futures. Our 401(k) retirement system is working on overtime. Retirement assets per household are more than seven times what they were 50 years ago. From 2013 to 2022, retirement assets increased by $4.4 trillion or 13.3%, peaking at $44.3 trillion in 2021. By pooling resources and offering diversified investment opportunities, mutual funds enable millions to build the financial stability they need for a comfortable and dignified retirement.
For millions of middle-class households, they’re an essential part of pursuing the American Dream. It’s no wonder the Employee Benefit Research Institute’s (EBRI) annual Retirement Confidence Survey found Americans in 2021 have near-record-high confidence in having enough money to live comfortably through retirement.
In recent years, the mutual fund industry has also cultivated a diverse marketplace of investors. Around 40% of households who purchased their first mutual funds in the last five years are people of color – more than double the percentage from prior decades. Younger generations, too, are entering the fold, with 35% of Gen Z households now holding mutual funds. This diversity underscores how mutual funds have broadened financial inclusion, empowering individuals from all walks of life.
Beyond individual households, mutual funds are also a driving force behind America’s economic success. They provide the capital that fuels business expansion, job creation, and innovation, turning entrepreneurial dreams into reality. They’re responsible for injecting over $30 trillion into financial markets, playing a pivotal role in making the last century one of unparalleled economic dynamism.
This financial vitality extends to new investment products like exchange-traded funds (ETFs) and collective investment trusts (CITs) – all of which owe their existence to the ecosystem created by mutual funds. These innovations continue to offer Americans diverse pathways to participate in the economy’s growth.
As we commemorate the centennial of mutual funds, it’s worth reflecting on how these financial instruments have not only reshaped markets but made financial aspirations attainable for millions. They’ve enabled generations to build wealth, invest in their futures, and reap the rewards of a thriving economy.
But their story is far from over. The incoming Administration and a new Congress have a unique opportunity to build on this legacy and ensure the next century remains economically vibrant. By promoting policies that protect and expand access to mutual funds and 401(k)s, lawmakers can ensure these tools remain a bedrock of financial security for years to come.
One hundred years ago, mutual funds were a revolutionary idea. Today, they are a testament to the power of innovation and inclusion in shaping a better future. Let’s celebrate their contributions and recommit to policies that empower Americans to invest in themselves and their country.
Rockford Stites is the President of Rockford Group, a boutique registered investment advisor in Carmel, IN. Rockford is a member of the National Association of Plan Advisors, the National Tax-Deferred Savings Association, and the Investments & Wealth Institute.