How are top mutual funds managed

Mutual funds are the preferred mode of investment due to their diversified approach, ease of operation and professional management by the fund managers. It is believed that the top mutual funds yield higher returns as compared to the traditional investment instruments such as FDs, RDs, etc. Also, mutual funds further invest your money into the equities, gold, and other avenues of the financial market. Thus their returns are not constant and depend on variable factors like the fluctuations in the market, change in the interest rates and various other important macroeconomic factors.

What is a mutual fund?

A mutual fund is an aggregate of investment avenues such as bonds, stocks, and other profitable funds which are owned by a group of investors. When you decide to buy top mutual funds you agree to pool your money along with the other investors and the funds are put to use in buying the government securities, bonds, shares of other companies, etc.

Regulation of the top mutual funds in India

Securities and Exchange Board of India (SEBI) regulates the mutual funds in India. SEBI has laid down strict requirements with respect to the eligibility criteria to hold and manage mutual funds in India. These strict regulations deal with the following:

  • Who can start a mutual fund?
  • How are the top mutual funds to be managed or administered?
  • The capital required to have in hand before starting a mutual fund.

The companies that fulfill the requirements stated by the SEBI become eligible to start a mutual fund.

Management of the top mutual funds

Top mutual funds have a portfolio manager to manage the funds. They perform the task of managing the funds on a daily basis. This management includes the functions of buying and selling the securities as per the objectives of the investment in the top mutual funds.

The structure of management in top mutual funds

The sponsor of the top mutual funds has to apply for the registration of the fund with the SEBI. The sponsor can be an individual, or a group of individuals, or body corporate. After getting an approval from the SEBI, the sponsor of the top mutual funds is required to form a trust which would hold the assets of the company. The sponsor also appoints the board of trustees and chooses an asset management company. Now the fund is to be managed by this board of trustees with the help of the asset management company. The board of trustees ensures that the fund carries out its functions and investments keeping the interests of all the stakeholders in mind. The asset management company chosen by the sponsor is responsible for managing the fund’s portfolio and communicating any changes in the management or the line of the portfolio to the investors.

Also, all top mutual funds have fund managers who oversee the investments done by the investors. The fund managers are generally people having expertise in financial matters and they receive a bonus based on their work and the performance of the top mutual fund that they manage. These fund managers manage your funds actively and are rewarded for that from time to time. So basically you are investing in a fund manager when you decide to invest in the top mutual funds.

If there is a change in the management of your investment, you should keep an eye on how the new fund manager does his/her job and how the previous one was doing it in the mutual funds.

There is no doubt in the fact that mutual funds are the best to invest in you just need to get right in your choice of the top mutual funds and the ways to invest.