The mutual fund turns 100 and is still kicking

One hundred years ago this year, the mutual fund made its investment industry debut. While I haven’t been in the industry quite that long, as someone who jumped into a career in finance at the onset of the ‘90s, I’ve seen huge changes in how people think about and access mutual funds over the course of my career. What hasn’t changed, however, is that these products have had and continue to have a significant impact on our industry. And they’re a product that’s played a big role in my own life, both personally and professionally.

To explain, let me take you back to the beginning. I began my career at Schwab Asset Management just shy of 25 years ago and I’ve gotten to do a lot of different things during that time. Today, I lead product management and innovation, which means I get to help launch the low-cost mutual funds and ETFs that Schwab Asset Management is known for—a career I never would have dreamed of when I was growing up. 

But my investing journey started much earlier—right after high school. I loved sports growing up in Ohio and played football throughout the years. Although I loved the sport, I knew it wasn’t going to be a career for me. Fortunately, I had a successful—and prescient—older cousin who encouraged me to get into the world of finance. I can still hear him saying “there will always be a need for people who understand money.” Pretty broad advice, but it was just the nudge I needed to get started on my path. So, I started dipping a toe into the world of investing. I bought a few books, and I spoke to a broker at a wirehouse. And as I did, I was pretty quickly turned off by the $95 commission to trade one stock. At the same time, I glommed onto the concept of diversification. It really hit home that buying one stock meant putting all my eggs in one basket. If that one company underperformed, my investment would be shot. But whereas if I spread my investment over 500 stocks, my money could grow steadily over time. And, you guessed it, the desire for diversification led me straight to the mutual fund—the only way at that time for a small retail investor like me to easily invest in a broad range of stocks.

Back then, all mutual funds had investment minimums. I did summer jobs mowing grass and managed to scrimp together a few thousand dollars to get started. Once I was invested and started to see my investment grow and compound, I was hooked! I became a lifelong investor, and the seeds were planted for my future career at Schwab. 

When I think about my experiences with investing, what stands out far beyond everything else are the countless conversations I’ve had with friends, family and acquaintances who have sought me out as a resource. The biggest question I’ve received has simply been, “how do I get started?” And those who know investing know that getting started, and getting started early, can often be the most critical (and intimidating) step. As a CFP, I love passing that knowledge on and seeing what people do with it. 

Take my brother-in-law, Mike, who is an incredibly skilled technician with a long career in manufacturing in Ohio. Early on in his career, I helped him get invested in an S&P 500 mutual fund offered through his company’s 401(k) and let it go to work. Over the years, he was totally consistent with his contributions and didn’t focus on how his portfolio performed day-to-day. A few decades later, he has a healthy nest egg that is more than he ever imagined. 

Now Mike is passing the same approach on to his son, who’s in his 20s and working for the same company. And like me when I was starting out, he’s already seeing the power of letting your investments grow and compound in action. 

Of course, there’s a lot that goes into building, growing and managing a nest egg—but the point is, the mutual fund played a key role in making that process easier and more accessible for more people. In fact, it’s hard for me to imagine that we’d have successful 401(k) investors like Mike without the mutual fund helping people invest in a diversified way. 

Stories like Mike’s are why I’ve been in the asset management business for nearly 25 years—and what keep me excited about what’s still to come, what impact investing will continue to have on people’s financial lives. It’s also what’s kept me at Schwab. I love Chuck’s story of disrupting the industry by bringing investing to the Main Street of America, and I feel incredibly privileged to play a part in creating access for people interested in investing. (Side note: I’m a lifelong Cleveland Browns fan, so I love a good underdog story!)

Just consider how much we’ve achieved with Chuck’s vision: from lower costs to greater ease and access to robust education. More specifically, when you think about the mutual fund alone, throughout the ‘80s and ‘90s, Schwab created one-stop shopping for mutual funds and provided access to hundreds of funds commission-free. We increased access to mutual funds through workplace retirement plans, made professional fund analysis and research tools directly available to retail investors, and—one of the things I’m particularly proud to have had a hand in—we became a leading provider of low-cost index mutual funds, and a leader in index investing along the way.

Today, people don’t need thousands of dollars to invest in their first mutual fund like I did in the ‘80s. Anyone can start investing with a small amount of money, and with access to education, tools and resources to help them along the way—and that’s thanks in a large part to Charles Schwab. As the first discount brokerage, the firm disrupted Wall Street, which prioritized the wealthy. Schwab significantly drove down costs and broadened access to investing to everyone.

The mutual fund has played a notable part in Schwab’s history and has had a huge impact on retail investors’ ability to achieve their financial dreams—from being at the forefront of innovation when launched 100 years ago to paving the way for many more recent innovations, including ETFs, direct indexing, and all kinds of products and solutions that increasingly give investors the power to invest to reach better financial outcomes, on their own terms.

A lot has changed for investors 100 years after the mutual fund was born. I’m excited for the future and innovations to come. At Schwab, many of those innovations will be viewed through our age-old lens: how we can expand investing opportunities for the masses and ultimately, help create more stories like my brother-in-law Mike’s.