How Mutual Funds Are Managed: A Look into the Process

Investing in mutual funds has become one of the most popular investment options in recent years due to its potential to deliver attractive returns over the long term. Mutual fund investment is suitable for individuals who are looking for diversification, easy access to professional asset management, and the ability to invest in small amounts regularly. In this article, we will delve into how mutual funds are managed, including what mutual funds are, how they are managed, and some of the best apps to invest in mutual funds.

What are mutual funds?

A mutual fund is a type of investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. When you invest in a mutual fund, you own a share in the fund itself, which reflects your proportional ownership in the underlying securities held in the fund.

Mutual funds are managed by teams of professional fund managers who use australian super fees their market knowledge and expertise to evaluate, purchase, hold, and sell securities for the mutual fund. The primary objective of the mutual fund is to provide an opportunity for small investors to invest in a diversified investment portfolio composed of several different stocks, bonds, or other securities that are preselected by professional investment managers.

How are mutual funds managed?

In general, mutual funds are managed by investment professionals with experience in portfolio management and financial analysis. The fund manager is responsible for overseeing the day-to-day operations of the mutual fund, managing the holdings of the fund’s portfolio, and executing trades in accordance with the investment objectives of the fund.

The mutual fund management process involves several stages, including:

1. Fund objective

The fund objective is the foundation of the mutual fund management process. It defines the goals and objectives that the fund seeks based on investor needs and expectations. The investment objective could be aggressive, seeking higher returns, or conservative, aiming for lower risk.

The fund manager determines the asset allocation strategy based on the objective, which includes targeting certain areas of the market such as growth, value, large-cap, small-cap, or bonds. The choice of the investment objective and strategy is essential for creating a coherent investment plan that aligns with the investors’ risk appetite while keeping the fund aligned with current market conditions.

2. Investment portfolio

The fund manager constructs an investment portfolio that aims to achieve the fund’s investment objectives. The fund manager should manage their portfolio with a focus on diversification, identifying securities that complement the fund’s objective but also offer synergies when combined with other securities in the portfolio. In terms of the securities, mutual funds invest in various types of assets, including equity and debt instruments.

Equity funds invest in stocks, while debt funds invest in bonds. Hybrid funds invest in a mix of both. Diversification also helps investors reduce risk through investments in different sectors, regions, and financial instruments.

3. Investment philosophy

An investment philosophy is a key element of fund management that reflects the approach and principles that underline how the fund manager manages the portfolio of securities. It features the guiding beliefs that dictate their investment behaviour and guide how the fund is managed.

Some fund managers could be risk-averse and value-seeking, while others could be more aggressive and growth-oriented. The investment philosophy influences how the fund is positioned, seeking opportunities while mitigating risk. The investment philosophy thus sets the standard of conduct for the fund manager.

4. Research and analysis

Investment research and analysis are critical components of the mutual fund management process. The fund manager applies a rigorous and systematic investment analysis process to identify opportunities that meet the fund’s objective. They carry out fundamental research that focuses mainly on finding companies that are underpriced or undervalued, or those whose value is defined by external factors, such as interest rates.

Technical analysis could also be applied to identify trends, patterns, and cycles to determine the timing of buying or selling securities. Additionally, the fund manager must have adequate knowledge about the macroeconomic environment, including the stock market, inflation, and interest rates, to make informed decisions.

5. Trading and rebalancing

Managing a mutual fund involves implementing various measures to ensure the performance of the fund aligns with the investment objectives of the fund. The portfolio requires regular monitoring and trades need to be executed to take advantage of emerging opportunities or adjust the mix of securities based on the current market trends.

The fund manager needs to decide when to buy, hold, and sell securities to obtain the desired asset allocation. Proper portfolio rebalancing is critical for adapting to changes in market conditions and for reducing risks associated with the concentration of assets in certain sectors or investments.

6. Reporting

Investors need regular and consistent reporting to understand how the mutual fund is performing and to keep track of the progress towards achieving the investment objective. The mutual fund’s performance is tracked and reported to investors through periodic reports such as prospectus updates, quarterly financial statements, and annual reports.

Many mutual fund management companies also provide investors with online access to individual portfolio performance data and other relevant information. Fund managers use data and analytics to ask themselves the tough questions and understand how to make strategic improvements to the fund in the future. These metrics serve to provide investors with a clear picture of the investments and the performance of their mutual funds.

Best apps to invest in mutual funds

Investing in mutual funds has become more accessible and convenient with the availability of several investment apps. Here are some of the best apps to invest in mutual funds:

1. SIP Planner by Bajaj Finserv: SIP Planner is a goal-based investment solution that allows investors to make systematic investment plans (SIPs) in mutual funds. The app enables investors to choose from a ready-made portfolio or create their own. SIP Planner simplifies the investment process and helps investors keep track of their portfolio as it grows over time.

2. Groww: Groww is an investment app that offers easy and affordable investment plans for mutual funds, stocks, gold, and more, with zero commission charges. It allows investors to invest directly through the app and quickly purchase, redeem, or switch mutual funds.

3. ET Money: ET Money is a popular app that enables investors to invest in mutual funds, stocks, and other investment products. The app provides investors with recommendations on how to invest in mutual funds based on their financial goals and risk profiles.

4. Paytm Money: Paytm Money is an investment app that offers investors the ability to invest in mutual funds with no commission charges. The app provides investors with personalized investment recommendations based on their investment preferences, risk appetite, and investment goals.


Mutual funds provide investors with an excellent opportunity to invest in a diversified portfolio of securities managed by professional fund managers. The fund management process involves several stages, including establishing the investment objectives of the fund, constructing an investment portfolio, and managing and monitoring the performance of the portfolio. With the availability of investment apps such as SIP Planner by Bajaj Finserv, Groww, ET Money, and Paytm Money, investing in mutual funds has never been more accessible, affordable and simplified.

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