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B Y A N T H O N Y C R I S T I A N O R B C W E A LT H M A N A G E M E N T - U S Investing is a crucial component of personal finance, regardless of the size of your portfolio. Individuals often face the difficult decision of how to allocate their resources among all the different investment products available to them. Between advertisements, financial salespeople, the internet, and even well-meaning friends and family, it seems everyone has a recommendation or advice. Two popular investment vehicles are mutual funds and separately managed accounts aka SMA's. Within those categories there are limitless variations of styles and types, but we are only talking about the basic structure today. Also, I am referring only to traditional Mutual Funds here, which we call open-ended or 1940 Act funds and not exchange traded funds (ETF's) or closed -end funds which are a whole other topic. Each has its own characteristics, benefits and drawbacks, making it essential for investors to understand the differences to make informed decisions or seek out professional, fiduciary guidance. DEFINITION AND STRUCTURE Let's explore the origins of the mutual fund and why they became so popular. In my opinion, the creation of mutual funds, was one of the most importin history, as it brought the markets to the masses. In the old days, the saying the rich get richer and the poor? Well, you know how it goes, couldn't be any truer. Your average person had very little opportunity to truly participate in the capital markets. Other than a utility stock here and there, the average "saver" was limited to bank savings products, CD's and, I suspect very few readers of "VUE on Finance" remember the bank "Christmas Club". Even if you did have enough money to allocate to some stocks and bonds, costs were prohibitive and your ability to properly diversify and trade, let alone have professional portfolio management, was nonexistent to anyone without access to large sums of investable assets. Wall Street was purely the playground of institutional money and the very wealthy. Minimum investments, oen in the millions of dollars, were required by Investment managers, so that they could trade these large sums with access to intellectual capital and research, and of course, the economies of scale that allowed for trading and diversification. While the roots of the modern mutual fund can be traced back to a Dutch investment trust in the early 1700's, the first modern mutual fund was launched back in Boston in 1924 and opened to the public in 1928, and is still in operation today. e basic idea of multiple investors pooling their assets into one fund, owned "mutually" by each investor, proportionate to the amount invested as a percentage of the total fund, allows for the fund to employ professional management, traders, research etc. and provide those investors with better opportunities to participate in the markets, per se. e availability of experienced, professional management, cost savings and scale, has clearly allowed for millions of investors to benefit from the markets in a way previously not available to them. It is estimated that mutual funds in the US now account for over $18 trillion, according to the St. Louis Federal Reserve. In simple terms a mutual fund is a highly regulated, pooled investment, that collects money from multiple investors to invest in a diversified portfolio VUE ON | FINANCE 94 VUENJ.COM

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