(9 of 9)
Another plan that draws ire is the regular withdrawal plan, which pays an investor a certain amount each month out of his investment. While the fund rises, the investor may earn more than enough money for his payments, but if it does not rise he may find that he eventually exhausts his cash—though some salesmen neglect to point out this peril. M.I.T. has finally decided to offer a withdrawal plan, taking pains to make the terms clear to the buyer.
Battle for the Dollar. The funds have made life rougher for the banks and insurance companies by quadrupling their share of the savings dollar since 1948 (to 5.3% today). The funds have lured so many insurance salesmen (along with their fat list of customers) that some insurance companies now threaten to fire any man found selling mutual funds on the side.
The insurance industry is hotly debating whether to fight back by adopting the variable-annuity plan proposed by Prudential's Carrol Shanks (TIME, March 18, 1957), but the annuities have run into nothing but trouble. The funds won a big victory in March when the U.S. Supreme Court backed their argument that insurance companies should register with the SEC to sell variable annuities, a prospect that has dampened the ardor of many insurance firms, which do not relish more Government regulations.
Out of the East. No one doubts that by luring people's savings into stocks the funds have broadened the base of corporate ownership. Two-thirds of all mutual fund holders live outside the Eastern Seaboard; about a third do not own other stocks, would probably not otherwise put their money into the market. Since nearly half the sales of funds are to professional and executive people, the industry feels that it has hardly begun to tap the broad mass market of potential investors. Estimates are that in ten years the funds will have assets of more than $50 billion—three times the current level—and 5,000,000 investors.
Whether or not the funds fulfill their hopes depends largely on the state of the U.S. economy. So confident of the future are M.I.T. and Dwight Robinson that they have shifted M.I.T.'s portfolio into the most bullish position since the beginning of World War II. Says Robinson: "I think that the economy is going to grow substantially and have some real opportunity for investors in common stocks in the next decade. Population is increasing. Industry is moving ahead. Government spending is not going to cease. I don't see how the economy can fail to have a big expansion—and the mutual fund industry with it."