Mutual funds date back to 1774 when Dutch merchant and broker Adriaan van Ketwich launched the first one in Holland to open the door to investing for investors with limited financial resources. A similar fund opened in London, England in 1868, The Foreign and Colonial Government Trust (now called The Foreign and Colonial Investment Trust) that intended to give small investors the same advantages as large ones by distributing their investment over a variety of stock choices. The mutual fund arrived in the United States in the 1880s and 1890s, but the first notable one opened in Boston in 1924, The Massachusetts Investors Trust, the first U.S. open-ended fund. An open-ended mutual fund is one that allows investors to sell back their shares to the fund at the end of each business day.

According to the Investment Company Fact Book, the trust “introduced important innovations to the investment company concept by establishing a simplified capital structure, continuous offering of shares, the ability to redeem shares rather than hold them until dissolution of the fund, and a set of clear investment restrictions and policies.”

The stock-market crash of 1929 and the Great Depression caused investors to lose confidence in the financial industry—limiting the growth of the mutual fund sector until laws such as the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 renewed investor confidence. In 1940, the forerunner to The National Association of Investment Companies (which is now known as The Investment Company Institute) was founded. The ICI describes itself as “the leading association representing regulated funds globally, including mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to investors in jurisdictions worldwide.”

Mutual funds grew in popularity in the 1950s. In 1951, the total number of funds surpassed 100, and there were more than one million shareholder accounts. In addition, the first mutual fund that focused on non-U.S. investments was offered to U.S. investors.

Major developments in the mutual fund industry during the 1960s through the 1980s include the availability of the first tax-free unit investment trust (1961), the introduction of money market funds (1971) and the first retail index fund (1976), and the passage of the Recovery Tax Act, which established “universal” individual retirement accounts for all workers—creating more investment opportunities for the average consumer (1981).

In 1990, mutual fund assets topped $1 trillion. Noteworthy developments of the 1990s include the availability of the first exchange-traded fund (1993), the passage of the National Securities Markets Improvement Act, which provided the Securities & Exchange Commission (SEC) exclusive jurisdiction for registering and regulating mutual funds and exchange-listed securities (1996), and the enactment of what the ICI bills as the “most significant disclosure reforms in the history of U.S. mutual funds, encompassing ‘plain English, fund profiles, and improved risk disclosure” (1998).

By 2000, mutual and related fund assets under management exceeded $5.7 trillion. There were 6,778 mutual funds. The number of mutual funds continued to grow throughout the 2000s (dipping only slightly during economic downtimes in 2002–04 and 2009–10). The 2002–04 period also included a major scandal in which portfolio managers at more than 10 major firms were implicated in insider trading, front running, and market timing, and received fines and other punishments from the SEC.

At the end of 2018, total U.S. mutual fund, exchange-traded fund, closed-end fund, and unit investment trust assets were $21.4 trillion. There were 9,599 mutual funds. Nearly 45 percent of U.S. households owned mutual funds.