But in a diversified mutual fund, the past record is a far better guide, for these reasons: (1) With a fund's assets spread among the stocks issued by fifty or more companies, it is impossible for a change in profits of any one or even of several of those companies to have much effect on the fund's total income or market value. Of course, in a general business recession, diversifica tion will not prevent a decline in a mutual fund's income and market value. But this lasts only a few years at the most; and when general business conditions improve again, a di versified fund moves along with the procession. (2) A mutual fund is not chained to its past, as most any other established business is. If the management of a manu facturing company decides to make a new product, it must conduct experiments, make changes in factory building and equipment, train personnel, and so on, all of which ties up a lot of capital, perhaps for several years, before the company can begin to make a profit on the new product. In contrast to the manufacturer, when a mutual-fund manager decides he had better get rid of the stock of "A" Company, and replace it with "B" Company's stock, all he has to do is to arrange for a broker to sell the one stock and buy the other.


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