Fund of Funds are the Mutual Funds which utilizes different investment resources that are available in the market, these mutual funds have different degrees of risks, yields and others based on the motive of the fund manager. As there are varying investment options the degree of risks also varies. For instance, if the fund manager wants to aim to get higher yields than the manager will target on the funds with higher NAV. As these mutual funds have variant options, so one can invest both in domestic and international funds. Depending upon the asset management company the scope of diversification increases. This kind of funds ensures less loss as they are managed by highly experienced and trained fund managers whose decisions are more accurate and predictable according to the market.
What are the different types of Fund of Funds?
Asset Allocation Funds-
These funds offer good returns, stable securities, and reduced risks. They are maintained by stable securities such as equity, debt instruments and precious metals. etc. These funds generate higher returns and stable securities.
Investing in gold trading is known as gold funds. The Fund of Funds depends upon the portfolio of mutual funds or gold funds based not the management companies or financial institutions according to their asset managements.
International Fund of Funds-
Fund of Funds investing in foreign countries or international level, the motive to invest in such funds is to profit more returns by investing in the stock and best performing bonds of different countries internationally.
Multi Manager Fund of Funds-
As the ne itself explains that these mutual funds are managed by multiple managers dealing different assets professionally and particularly.
Exchange Trade Funds (ETF) Fund of Funds-
This is one of the easiest ways to invest in ETF Funds, as usually to invest in such fund’s availability of Demat Trading account is a must, but though the mutual funds of fund of funds, investor can get easy access to these funds without the Demat account.
What are the pros and cons of investing in Fund of Funds?
- Offers diversification for investment options.
- Managed by highly trained professional fund managers who gives accurate decision depending upon the market status.
- Offers investor to invest even with limited financial resources.
- Higher risks
- Higher expense ratio
- Longer duration period
- Lesser liquidity options
- Subjected Tax implications