A fund of funds (FOF) enables investors to make a single investment and to give them access to a diversified portfolio over multiple effects. It invests in multiple investment funds, so that investors can diversify their portfolios and spread risks.
What is a fund of funds?
The Association of Mutual Funds in India (AMFI) defines FOF as “an investment strategy to hold a portfolio of other investment funds instead of investing directly in shares, bonds or other effects”. A FOF mainly invests in the units of another investment fund schedule. This type of investing is often referred to as investments in several managers.
With FOF, investors can distribute risks by diversifying over multiple effects. The investments included under FOF are part of other regulations for investment funds or houses with investment funds. Typically, it is assumed that FOFs are primarily suitable for small investors who want exposure to different effects and those who do not have the expertise to choose a single activa class to invest.
How does FOF work?
Similar to investment funds, which in various effects, such as shares and debt instruments, act on behalf of investors, FOF invests in other investment funds. Depending on the investment strategy, the fund manager can invest in one fund or funds from different fund houses.
Fund of Funds – Types
Assets -allocation funds
Asset allocation funds include a series of various effects such as shares, raw materials and debt instruments.
Gold funds
Golden funds are a kind of investment fund that mainly acts in golden effects.
International Fund of Funds
These funds invest in shares of companies mentioned outside of India, so that global exposure is given to an investor.
Multi-Manager Fund of Fondsen
A multi-manager fund with funds diversified investments by holding a portfolio of other investment funds, each managed by a different, specialized fund manager.
ETF Fund of Funds
These funds form listed funds in his portfolio and are a popular investment tool in the country.
Disclaimer: This article is only for informative purposes and does not form financial advice; Consult a qualified financial adviser before you make financial decisions.
