top of page

Funds of Funds - Explained

Writer: MyRupayaMyRupaya

Defining and Using the Term "Fund of Funds"


Instead of investing directly in equities or other asset classes, a Fund of Funds (FoF) is a unique Mutual Fund strategy that invests in Hedge Funds and other Mutual Funds. When you invest in a Debt Mutual Fund, for example, the fund management directly invests your money in debt and debt-related assets. The fund manager will first assign money to a Mutual Fund scheme, and then the Fund of Funds Mutual Fund scheme will invest in funds of equity, debt, or mixed mutual funds in the case of FoF.


What Sets Fund of Funds Apart?


So, does it make a difference whether you invest directly in stocks and bonds? Essentially, Fund of Funds help with portfolio diversification and risk reduction. The FoF will invest in either the same or various fund firms' mutual fund schemes.


Asset allocation funds, gold funds, overseas FoFs, and multimanager investment FoFs are the many types of Fund of Funds available in India.


The Fund of Funds Scheme has a number of advantages.


Diversification


FoF focuses on the best-performing Mutual Funds across all assets and sectors, allowing you to maximise returns while minimising risk. They also put their money into Hedge Funds.


Cost Because FoFs invest in other Mutual Funds, you may be responsible for the cost ratios of all other Mutual Funds, as well as fund manager commissions and other management expenses.


Taxation

FoFs are treated as non-equity schemes for taxation.


Short-term capital gains apply to FoFs held for less than three years and are taxed according to your income tax bracket. Long-term capital gains on FoFs held longer than three years are taxed at a rate of 20% plus indexation.


Investment vistas In India, fund of funds perform well when kept for a long time - often three years or more, depending on market conditions.


Conclusion


The Fund of Funds plan is perfect for investors who want to diversify their portfolios without having to worry about market timing or examining all of the schemes' NAVs. At a moderate risk, a well-diversified investment portfolio delivers decent returns. Before investing in FoFs, make sure you analyse the expenses, risks, and investment goals and make educated selections.

Comments


Connect with us

  • Instagram
  • Facebook
  • Twitter
  • LinkedIn
  • YouTube

Incubated at MNIT Innovation and Incubation Centre

ww1.png
ww30.png

We are recognized by DPIIT as a startup.

Startup-India-creates-5-5-lakh-jobs-and-recognises-50000-startups-in-5-years.png
857-8570158_make-in-india-programme-make-in-india-logo.png

Disclaimer

The contents of this document are meant merely for information purposes. The information contained herein is subject to updation, completion, revision, verification and amendment and the same may change materially. The information provided herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person‘s nationality, residence or otherwise) be contrary to law or regulation or would subject Myrupaya.in or its owners/affiliates to any licensing or registration requirements. This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. Please obtain professional legal, tax and other investment advice before making any investment. Any investment decisions that may be made by you shall be at your sole discretion, independent analysis and at your own evaluation of the risks involved. The use of any information set out in this document is entirely at the recipient's own risk. The information set out in this document has been prepared by us based upon projections which have been determined in good faith by Myrupaya.in its administrators and from sources deemed reliable. There can be no assurance that such projections will prove to be accurate. Myrupaya.in does not accept any responsibility for any errors whether caused by negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this document. The information set out in this document has been prepared based upon projections which have been determined in good faith and sources considered reliable by Myrupaya.in. In preparing this document we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. Misuse of any intellectual property, or any other content displayed herein is strictly prohibited.

bottom of page