We will discuss the role of fund managers in mutual funds, why they are important, and how can you evaluate them.

The story

Imagine a mutual fund as a bus that takes you from your current location (your financial situation today) to your desired destination (your financial goals).

You don’t need to worry about steering the bus or choosing the route—just sit back and enjoy the ride. It’s the driver’s (fund manager’s) job to pick the best roads, navigate through traffic, and ensure you reach your destination safely and on time.

Of course, depending on the road conditions (market volatility), the journey might be bumpy, but depending on the driver how smoothly it could navigate those bumpy routes.

The point is when you opt for a mutual fund; you are paying for convenience, judgment, and the ability of a fund manager to navigate unexpected challenges in the market.

You are literally handing over your money to a fund manager when you invest in mutual funds. So evaluating a person who’s managing your money becomes a crucial part.

And here’s how you can approach it.

Evaluating a Fund Manager

Three things that you must look for in your fund manager.

  • Beating The Benchmark:
    The primary job of a fund manager is to beat the benchmark of the fund. If the fund is performing better than the benchmark consistently, it’s a green flag.
  • Experience:
    Experience across the good and bad times gives an edge in making well-informed decisions. Ideally, a minimum of 8 to 10 years of experience is a positive indicator.
  • Tenure With The Fund:
    A manager who has been with the same fund for many years is likely to have a deep understanding of the fund’s investment strategy, which can be beneficial for long-term growth.

You can easily find out these things about your fund manager on your mutual fund investing app. Alternatively, you can use platforms like Value Research and Morning Star.

To conclude

Next time you open your investing app, do check these things about a fund manager. 

The success of your mutual fund isn’t just about numbers, but also about how skilled the fund manager is because that’s where future returns would likely come from.