Thread by @amitTwitr

Americans didn’t rally to Investments in stock markets & mutual funds, etc. on their own. Greatest “demand” in history, the greatest markets were created by some cos, men & events. Here is some history..<thread>

1) Merrill Lynch - believed in bringing Wall Street to Main Street.

Early on Charles Merrill believed that in order for American investing to become a big thing (mass market), middle class will have to be interested in investing. just the same thinking that Giannini of BofA had for banking - focus on “the little fella” 👨‍💼

Small 💵 investors

So he reduced fees tht brokers charged; changed model by giving salaries to agents instead of just comissions to bring better advice & trust.

Note tht biz history is gr8, it has these lessons. Many of the greatest financial institutions were built focusing on the middle class

C. Merrill believed in customer education. He said if small investors understand they will come. so he started huge PR campaigns
- 1 out of every 4 ad dollars spent on WS
- content marketing: 11 mn pieces in 1955 alone
- seminars/booths

Result: 20% of volume of Wall Street

Anyways let’s move ahead... FinTech overall is way ahead in other parts of the world. In Asia (India/China) payment tech >> US. but when it comes to Investments/MFs/Wealth Mgmt US is huge & advanced. retail participation amazing 🚀

So you read abt Merrill, now let’s go to #2

2) Fidelity & Mutual funds:
Mid-1950s only 4% Americans were investing.

Then came a guy from Shanghai called Tsai to an investment firm called Fidelity. He ran their Capital fund frm scratch and made it into a $340 mn mutual fund. These were Go-Go years and he personified it

Again mutual funds were a great product for the growing middle class Americans. And Fidelity with their “individualistic” money mananger approach and people like Tsai became famous as people saw their money grow under their watch

Tsai eventually went out of Fidelity and created his own mutual fund called Manhattan fund. It was 10 times oversubscribed in first go in 1966 and within couple years it was managing $525 m.

But he did start making mistakes with v high fees/charges &didn’t learn from history.

His fund didn’t do that well in long term but many others continued their success. Mutual funds became a permanent and successful feature of American investing.

And then another big innovation in personal finance was waiting to come to markets. And that’s my #3 in this thread

3) Money market funds - until 1972 SEC didn’t allow them. 1st one to hit mkt was called reserve fund. Not a mutual fund. it was pure genius in finding the regulatory arbitrage. Plus use of computers and tech to provide better exp.
- save your money just like bank a/c (cash mgt..

...
- you get principal plus a sum (something that strongly resembled “interest”) but higher than your bank acc. Regulation Q didn’t allow banks to compete on higher interests 😉 so they were capped
- Easy withdrawals from MMF with something that strongly resembled checks...

...fidelity was the co that brought the check writing capabilities to these MMFs
- Direct to consumer approach of Fidelity (which was wholesale thus far) brought more people to invest
- plus higher interests

—> By 1991, $400 B 🤩 in MMFs had been invested in 300 such funds 💥

Apart from the above companies & products 3 more things helped American investing to become what it is today:
1) The boom years of 1970s, 1980s and early 1990s ensured that more people came to stock markets in the US. Thr were some bumps but only temporary so ppl saw growth📈 ...

...
2) 401k came into being in 1978. when things moved from pension funds to 401k. So ppl could manage their own money and invest. small investors (middle class) became a huge investing class

3) technology stocks hitting the mkts w/ Netscape bumper IPO & others during the 90s

So you see a lot has to happen to create huge investment class...and mass markets. It takes a village!