In a mutual fund, If I invest Rs.5000 in FUND X today, will the fund manager immediately uses my invested fund in any equities or whatever mutual fund that FUND X belongs to?
How does the cash flow work between AMC and Investor while buying and redeeming the Mutual fund?
AFAIK they always have cash, may not exactly be cash but very liquid instruments, so they use this. Also, it depends on the type of fund and the strategy that is mentioned in the scheme document, for example, a fund may say that they will be in liquid instruments until they find good opportunities, or find the valuations reasonable etc. Also, they don’t always buy at once, they may build a position slowly.
So in the long scheme of events, the way they invest does not matter, MF investing is not intraday trading.