Fund of Funds: Index Fund

 What is meant by fund of funds?

A 'Fund Of Funds' (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. An FOF Scheme of a primarily invests in the units of another Mutual Fund scheme.

How does a fund of funds work?

A fund of funds (FOF) is an investment product made up of various mutual funds—basically, a mutual fund for mutual funds. They are often used by investors who have smaller investable assets, limited ability to diversify or who are not that experienced in choosing mutual funds.

What are the advantages of fund of funds?

Fund of fund combines different units of mutual funds scheme with different characteristic and distinct risk and return profile. Carefully combining different scheme offers the benefit of diversification, which an investor can get access to simply via single fund of fund instead of buying different funds.