Home/Blogs/What are Fund of Funds 

What are Fund of Funds 

mutual fundmutual fund accountmutual fund investmentSIP
03 Aug 20236 mins readBy MOFSL

Fund of funds (FoF) is a well-sought way to invest in the trading world. By putting money into a variety of underlying assets, these funds give investors a chance to diversify their investments. For investors looking for a balanced investing strategy, this method offers exactly what they want. Let’s explore what it’s all about! 

What Is A Fund of Funds (FoF) Investment?

FoF is a pooled investment vehicle, making investments in various kinds of funds. Instead of investing directly in stocks, bonds, or other assets, a FoF holds a portfolio of other investment funds. A FoF may be fettered or unfettered, depending on if it allows investing in funds managed by the same investment company or separate organizations.

Open Your free Demat Account in just 5 minutes!

What Are The Different Types Of FoF Investments?

Depending on the fund's investment goal, FoF can have different forms. Here are a few popular types, each with a unique goal and approach.

1. Multi-Asset FoF: As the name suggests, these funds make investments in a variety of assets. To control risk and possibly increase returns, its aim lies in diversification across various investments. The diversity among different asset groups also reduces investment volatility.

2. Exchange Traded FoF: ETF of funds makes investments in a portfolio of other exchange-traded funds. ETF of funds gives investors exposure to numerous ETFs that cover different market areas or investing strategies and diversification opportunities. However, trading and Demat accounts are necessary to invest in ETFs. 

3. Gold FoF: This FoF gathers investor funds to invest in a variety of gold-related products and investments. They are designed to monitor gold's performance and give exposure to a variety of assets that are tied to the metal. Gold FoF provides liquidity, transparency, and the chance of capital growth. 

4. International FoF: It pools client funds to invest in a diverse portfolio of mutual funds or ETFs that target global markets. Investors can geographically diversify their portfolios and possibly take advantage of global market possibilities by investing in them. 

How To Invest Through FoF?

Before making any investment decisions, investors must perform extensive research. Investors need to comprehend the characteristics of individual FoF and their potential advantages and disadvantages. They should further consult with financial experts. As a result, investors can make correct choices that are in line with their investment goals and preferences. 

Final Words

FoF provides investors with a practical and diversified means to access a variety of investment options. They give access to exclusive investment opportunities, investment management expertise, and immediate diversification. Like any investment, FoF should be assessed in sync with an investor's overall portfolio.

 

Related Blogs: Facts You Must Know About Focused Funds | What are the Oldest Mutual Funds | Decoding ESG Investing: The Future is Green | What are Conservative Hybrid Funds? Know Here!

Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C