A Retrospective Look at the Mutual Fund Industry

[roi2020]

John Rekenthaler from M* reminisces about the mutual fund industry over the past 33 years.
Random quotes below.


"In 1988, the largest mutual fund was Franklin U.S. Government Securities (FKFSX), which finished the year with $11.7 billion."

"In 1988, three index funds existed: 1) Vanguard 500 Index (VFINX), 2) DFA U.S. Micro Cap (DFSCX), and 3) a brand-new entrant from Fidelity that was eventually merged into the company’s current offering Fidelity 500 Index (FXAIX). (Even that list is suspect, as DFA now states that its funds are actively managed. However, as it called DFA U.S. Micro Cap an index fund at the time, that is where I have placed it.) In aggregate, those funds held $2 billion, making for a market share of slightly under 0.5%."

"Back in the day, investors who emphasized fund expenses were viewed as cranks. Life was too short to worry about a few basis points. In 1993, for example, the five top-selling mutual funds carried average an average expense ratio of 1.09%."

Link

[Chahta]

Back in the day mutual were sold by salesmen. No load funds were rare. Now the investing world has changed and become what investing should be. We do our research thanks to M* and others. Then we can buy investments that have reasonable costs for them. Can anyone remember paying 5% load to buy a fund? That on top of a management fee.

[fishingrod]

I do remember, Edward Jones trying to sell me 5.75% front end loaded funds, lol. These funds had also high management fees and 12B-1 fees. 

I also remember his speech about "How he wouldn't do anything against my best interest, because He needed to be able to sleep at night."

I believe they are still selling 5.75% loaded funds.

[retiredat48]

In about 1970, I made a strategic decision to invest only in mutual funds.

At that time about 20 such no-load funds existed...mostly were large cap-aggressive growth.

A publication called NO-Load Fund digest focused on all no load funds, incl providing 200 day Moving Averages.

Yes, investing industry spent millions advertising AGAINST no-loads. But surprisingly each year the NL index of funds bettered the load funds. Beating Merryl Lynch each year was the key.

Get this...for over five years, you could buy a mutual fund today, and get the previous days closing price. Quite useful to make a quick buck trade, on large up days. The SEC eventually outlawed this by rule change.

I had about $300 invested in one fund, that eventually declined 95%! I kept that fund in my portfolio for the next 20 years, to remind me to always use my Pyramid-Up technique, which never averages down. Thank heavens, I did not average down. Saved me a bundle. The fund eventually merged into another.

The good ol days.

R48

[johntaylor]

Yep, never bought a load fund