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The Manager

Each fund, or closely related group of funds, is run by a professional manager responsible for both its day-to-day operations and for its successful investment performance. In fact, the skill of the manger is so closely linked to the success of a fund that many experts advise investors to pick a fund based on the manager - and even to consider dropping a fund if a star manager leaves.

Inside a Mutual Fund

A typical fund depends on a battalion of specialists, including financial analysts, accountants, traders, and sales representatives, plus support staff.

• Fund managers and analysts are always in the market for new securities that meet their investment objectives.
• The research staff provides up-to-the-minute price information and performance analysis.
• Trading managers authorize the buy and sell orders.
• Traders looking for the best price use computers and telephones to execute deals.

Making Fund Decisions

Every day the fund's manager and financial analysts digest how the stock and bond markets did the day before, where their fund stands in relation to other funds and benchmark indexes like the S&P; 500, and what economic news is likely to affect the fund's value.

Buying and Selling

A typical fund buys and sells securities in a specific financial market of markets, at the rate of approximately three million sales tranaactions a day. That means that on a typical day $150 million worth of stock, bonds, or investments changes hands. Because mutual funds trade in such large volumes, they're known as institutional investors.

Reporting Losses and Gains

The fund keeps a running count of its balance sheet. At the close of every trading day, the staff calculates details of the fund's current value, and the change from the day before, and sends the information to NASD, the National Association of Securities Dealers. That information appears in the media the next morning for you - and everyone else - to see.

Technical Services

Every aspect of a mutual fund's operation depends on sophisticated equipment that tracks investments, permits split-second trading, and makes all the fund's information available to the investment industry and the individual client at the same time.

Investor Services

Although you'll probably have a long-distance relationship with your mutual fund, you can expect a lot of attention. Written confirmations follow up all the telephone and electronic transactions. As a result of this follow-up documentation, the industry as a whole has extremely high-quality control.

What's more, most fund companies make it easy to buy and sell shares, making good on the claim that mutual funds are among the most user-friendly investments.

Using the Mails

Investment checks are credited to the right client accounts at the day's closing price. Then they're shipped off to the bank. Redemption checks and confirmations of purchases or sales from the previous day's transactions are mailed out to clients.

Using the Telephone

There are very few mutual fund transactions that can't be done by phone - as long as you sign up for telephone services when the account is opened. At most funds, you can talk to service representatives to request information, transfer funds, or sell shares throughout the day and often well into the evening. After the people go home, automated phone systems provide details about earnings, balances, and recent trades, as well as other account and performance information.