People have been investing since times immemorial. You could invest money as an owner (equity) as a lender (debt), as a landlord (rent) as a banker (gold). However, as the market got more and more sophisticated direct investing became difficult if not impossible. So the common investor needed a manager who would help him/her in this effort. This led to the emergence of mutual funds. Thus clearly mutual funds were born because :

• Because financial market become sophisticated and complex.

• In USA Mutual fund industry was created more than a Century ago
• In India the Mutual fund industry was born in 1963 with the creation of UTI. It is to the vision of Mr. G S Patel that he created it as a trust and the form is still in use.
  

Concept of a Mutual Fund

• Common pool of money –  only those who have the same  needs should come together  under one umbrella.  That is to say if you want debt  investments and your brother wants equity investments  you will  invest through different schemes
• Joint or “mutual” ownership – the person who  invests get the benefits.
• Units are the representation of ownership  –  the unit holder of a mutual fund is neither a  lender  nor  the  “owner” of the fund house. He is giving his money  for being managed  by the fund  house.

Constitution

• In US Mutual Funds are constituted as an investment company.

• In India Mutual Funds are constituted as a trust.