{"id":5586,"date":"2025-05-13T18:40:11","date_gmt":"2025-05-13T13:10:11","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=5586"},"modified":"2025-05-13T18:42:24","modified_gmt":"2025-05-13T13:12:24","slug":"fund-of-funds","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/","title":{"rendered":"Fund of Funds (FOF): Meaning, Types &#038; Advantages"},"content":{"rendered":"\n<p>All investors are different. Many may not be able to digest the tide of equity while the safety of debt might not excite some others. The <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-mutual-funds-beginners-guide-to-mutual-fund-investment\/?utm_source=blog&amp;utm_medium=article\">mutual fund<\/a> industry has been evolving to cater to all investors through various types of schemes customised to the varied risk profiles of investors. Fund of funds (FoF) is one such scheme that invests its pool of resources in other mutual funds available in the market. How does this help? Why should one look at such an option? Let\u2019s deep-dive into what FoFs are and the list of top fund of funds<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#List-of-Best-Fund-of-Funds\" title=\"List of Best Fund of Funds\">List of Best Fund of Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#What-Are-Fund-Of-Funds\" title=\"What Are Fund Of Funds?\">What Are Fund Of Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Types-Of-Fund-Of-Funds\" title=\"Types Of Fund Of Funds\">Types Of Fund Of Funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#1-Gold-FoFs\" title=\"1. Gold FoFs\">1. Gold FoFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#2-Silver-FoFs\" title=\"2. Silver FoFs\">2. Silver FoFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#3-Domestic-%E2%80%93-Equity-Oriented-FoFs\" title=\"3. Domestic \u2013 Equity Oriented FoFs\">3. Domestic \u2013 Equity Oriented FoFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#4-Domestic-%E2%80%93-Debt-Oriented-FoFs\" title=\"4. Domestic \u2013 Debt Oriented FoFs\">4. Domestic \u2013 Debt Oriented FoFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#5-Domestic-%E2%80%93-Hybrid-FoFs\" title=\"5. Domestic \u2013 Hybrid FoFs\">5. Domestic \u2013 Hybrid FoFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#6-Overseas-FoFs\" title=\"6. Overseas FoFs\">6. Overseas FoFs<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Advantages-Of-Fund-Of-Funds\" title=\"Advantages Of Fund Of Funds\">Advantages Of Fund Of Funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Diversification\" title=\"Diversification\">Diversification<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Trained-managers\" title=\"Trained managers\">Trained managers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Alleviation-of-risk-and-volatility\" title=\"Alleviation of risk and volatility\">Alleviation of risk and volatility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Low-resource-requirement\" title=\"Low resource requirement\">Low resource requirement<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Disadvantages-Of-Fund-Of-Funds\" title=\"Disadvantages Of Fund Of Funds\">Disadvantages Of Fund Of Funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Expense-ratio\" title=\"Expense ratio\">Expense ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Tax\" title=\"Tax\">Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Overlap-of-holdings\" title=\"Overlap of holdings\">Overlap of holdings<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Factors-to-Consider-Before-Investing-in-FoFs\" title=\"Factors to Consider Before Investing in FoFs\">Factors to Consider Before Investing in FoFs<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#1-Double-Layer-of-Costs\" title=\"1. Double Layer of Costs\">1. Double Layer of Costs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#2-Past-Performance\" title=\"2. Past Performance&nbsp;\">2. Past Performance&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#3-Investment-Objective-Time-Horizon\" title=\"3. Investment Objective &amp; Time Horizon\">3. Investment Objective &amp; Time Horizon<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#4-Liquidity-and-Exit-Load\" title=\"4. Liquidity and Exit Load\">4. Liquidity and Exit Load<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#5-Currency-Risk-for-Overseas-FoFs\" title=\"5. Currency Risk (for Overseas FoFs)\">5. Currency Risk (for Overseas FoFs)<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#Frequently-Asked-Questions-Around-Fund-of-Funds\" title=\"Frequently Asked Questions Around Fund of Funds\">Frequently Asked Questions Around Fund of Funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#How-does-a-Fund-of-Funds-differ-from-a-regular-mutual-fund\" title=\"How does a Fund of Funds differ from a regular mutual fund?\">How does a Fund of Funds differ from a regular mutual fund?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.tickertape.in\/blog\/fund-of-funds\/#How-are-Fund-of-Funds-taxed-in-India\" title=\"How are Fund of Funds taxed in India?\">How are Fund of Funds taxed in India?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"List-of-Best-Fund-of-Funds\"><\/span>List of Best Fund of Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Name<\/strong><\/td><td><strong>Sub Category<\/strong><\/td><td><strong>AUM (Cr.)<\/strong><\/td><td><strong>CAGR 3Y (%)<\/strong><\/td><td><strong>Expense Ratio (%)<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/mirae-asset-nyse-fangetf-fof-M_MINA\">Mirae Asset NYSE FANG+ETF FoF<\/a><\/td><td>FoFs (Overseas)<\/td><td>1,732.59<\/td><td>49.13<\/td><td>0.04<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/icici-pru-bharat-22-fof-M_ICB2\">ICICI Pru Bharat 22 FOF<\/a><\/td><td>FoFs (Domestic) &#8211; Equity Oriented<\/td><td>2,270.52<\/td><td>32.33<\/td><td>0.12<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/mirae-asset-sp-500-top-50-etf-fof-M_MIR0\">Mirae Asset S&amp;P 500 Top 50 ETF FoF<\/a><\/td><td>FoFs (Overseas)<\/td><td>583.19<\/td><td>25.40<\/td><td>0.09<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/motilal-oswal-nasdaq-100-fof-M_MOT1\">Motilal Oswal Nasdaq 100 FOF<\/a><\/td><td>FoFs (Overseas)<\/td><td>4,859.29<\/td><td>24.37<\/td><td>0.19<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/edelweiss-us-technology-equity-fof-M_EDES\">Edelweiss US Technology Equity FOF<\/a><\/td><td>FoFs (Overseas)<\/td><td>2,428.79<\/td><td>24.13<\/td><td>1.48<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/mirae-asset-nifty-india-manufacturing-etf-fof-M_MINT\">Mirae Asset Nifty India Manufacturing ETF FoF<\/a><\/td><td>FoFs (Domestic) &#8211; Equity Oriented<\/td><td>108.02<\/td><td>23.61<\/td><td>0.1<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/icici-pru-india-equity-M_ICIY\">ICICI Pru India Equity<\/a><\/td><td>FoFs (Domestic) &#8211; Equity Oriented<\/td><td>168.32<\/td><td>22.22<\/td><td>0.61<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/sbi-gold-M_SBIGL\">SBI Gold<\/a><\/td><td>FoFs &#8211; Gold<\/td><td>3,930.78<\/td><td>22.18<\/td><td>0.1<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/lic-mf-gold-etf-fof-M_IDBIG\">LIC MF Gold ETF FoF<\/a><\/td><td>FoFs &#8211; Gold<\/td><td>125.45<\/td><td>22.18<\/td><td>0.2<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/icici-pru-regular-gold-savings-fund-M_ICIEU\">ICICI Pru Regular Gold Savings Fund<\/a><\/td><td>FoFs &#8211; Gold<\/td><td>2,056.55<\/td><td>22.15<\/td><td>0.09<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><em>Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory in nature. Please do your own research or consult your financial advisor before investing.<\/em><\/p>\n\n\n\n<p>Note: The data on this list of fund of funds is from 13th May 2025 and derived using<a href=\"https:\/\/www.tickertape.in\/screener\/mutual-fund?utm_source=blog&amp;utm_medium=article\"> Tickertape Mutual Fund Screener<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-Are-Fund-Of-Funds\"><\/span>What Are Fund Of Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Fund of funds is a <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-mutual-funds\/?utm_source=blog&amp;utm_medium=article\">mutual fund investment<\/a> scheme wherein the pooled capital of investors is invested in another mutual fund rather than diversifying into equities, bonds or other <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-asset-allocation\/?utm_source=blog&amp;utm_medium=article\">asset classes<\/a>. This helps investors create a <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-select-mutual-fund-portfolio\/?utm_source=blog&amp;utm_medium=article\">portfolio of mutual funds<\/a> instead of direct exposure to stocks, bonds, or other securities. This also means that the underlying investments for a fund of funds portfolio are the units of other mutual fund schemes.<\/p>\n\n\n\n<p>Mutual fund of funds works in two ways, the fettered way and the unfettered way. A fettered way of investing in fund of funds means that the entire capital of a fund is invested in portfolios managed by the same investment company. In an unfettered way, the fund of funds investments are made into external funds which different fund managers and fund houses manage.&nbsp;<\/p>\n\n\n\n<p>FoFs can be domestic, as in, invest in domestic mutual funds, or give investors a unique opportunity to get exposure to foreign markets through a foreign FoF! In a foreign FoF, the domestic fund invests its capital in the portfolio of a foreign fund that has exposure to securities native to that country or global assets.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types-Of-Fund-Of-Funds\"><\/span>Types Of Fund Of Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Fund of Funds (FoFs) come in several variants, each tailored to suit different investment strategies and risk appetites. Here&#8217;s a breakdown of the major types:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1-Gold-FoFs\"><\/span>1. Gold FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These funds invest primarily in gold <a href=\"https:\/\/www.tickertape.in\/blog\/exchange-traded-funds\/?utm_source=blog&amp;utm_medium=article\">exchange-traded funds<\/a> (ETFs). Investors gain exposure to gold prices without directly holding physical gold. Ideal for those looking to hedge against inflation or diversify their portfolio with a commodity-based asset, Gold FOFs offer convenience and tax efficiency, especially when held for the long term.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2-Silver-FoFs\"><\/span>2. Silver FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Similar to Gold FoFs, Silver FoFs invest in silver ETFs. While relatively newer to the Indian mutual fund landscape, they allow investors to participate in silver price movements without the hassles of storage. These funds may appeal to investors bullish on industrial demand for silver and looking to diversify beyond traditional asset classes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3-Domestic-%E2%80%93-Equity-Oriented-FoFs\"><\/span>3. Domestic \u2013 Equity Oriented FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Domestic fund of funds allocate capital to a basket of equity mutual funds. They aim to generate long-term capital appreciation by investing across diversified equity schemes or themes. These funds are suitable for investors seeking a hands-off approach to equity investing while benefitting from professional fund selection and diversification.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4-Domestic-%E2%80%93-Debt-Oriented-FoFs\"><\/span>4. Domestic \u2013 Debt Oriented FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Focused on <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-debt-funds\/?utm_source=blog&amp;utm_medium=article\">debt mutual funds<\/a>, these low-risk fund of funds are designed for conservative investors seeking stable returns with lower volatility. They invest in various fixed-income instruments through underlying debt schemes. Debt-oriented FoFs are useful for those prioritising capital preservation and predictable income over high returns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5-Domestic-%E2%80%93-Hybrid-FoFs\"><\/span>5. Domestic \u2013 Hybrid FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Hybrid fund of funds invest in hybrid mutual funds, which in turn have a mix of equity and debt exposure. The goal is to balance growth and stability. Hybrid FoFs are well-suited for moderate-risk investors looking for a diversified asset allocation strategy within a single investment vehicle.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6-Overseas-FoFs\"><\/span>6. Overseas FoFs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Overseas FoFs invest in international mutual funds or ETFs, offering exposure to global markets, sectors, or geographies. These funds are ideal for investors looking to diversify their portfolios internationally and benefit from growth opportunities outside India. They may include themes like US equities, global technology, or emerging markets.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages-Of-Fund-Of-Funds\"><\/span>Advantages Of Fund Of Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Diversification\"><\/span>Diversification<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As best performing fund of funds invest in multiple mutual funds, it ensures multi-pronged diversification of the portfolio and buffers wealth against sudden economic or political turmoil.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trained-managers\"><\/span>Trained managers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Professionals who manage the best FoFs have years of experience in the financial markets. They make investment decisions based on investors\u2019 financial goals and try to beat indexes to generate maximum returns for investors. The portfolio of high-return fund of funds is created keeping in mind various risk profiles and aims to achieve the objectives of the fund.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Alleviation-of-risk-and-volatility\"><\/span>Alleviation of risk and volatility<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The volatility in FoFs for long-term is generally considerably low. Debt funds and G-sec funds offset the volatility and risk associated with equity.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Low-resource-requirement\"><\/span>Low resource requirement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/portfolio-manager\/?utm_source=blog&amp;utm_medium=article\">Fund managers<\/a> do all the research required to invest in mutual funds and hedge funds on behalf of clients. Therefore, investors with limited financial resources can explore fund of funds for SIP.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages-Of-Fund-Of-Funds\"><\/span>Disadvantages Of Fund Of Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Expense-ratio\"><\/span>Expense ratio<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Even though top fund of funds invest in other funds, there are multiple layers of administration costs involved in managing FoFs. This makes it an expensive fund to invest in.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax\"><\/span>Tax<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>FoFs are treated as non-equity funds for the purpose of taxation. Even if the fund invests in an equity-oriented scheme, it will still be treated as a debt scheme and taxed accordingly.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overlap-of-holdings\"><\/span>Overlap of holdings<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When the funds are invested in multiple mutual funds, the chances of having the same securities are high. For instance, if any small-cap company is the same in two of the funds invested, then even a small fluctuation in the price on the downside can affect the portfolio significantly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Factors-to-Consider-Before-Investing-in-FoFs\"><\/span>Factors to Consider Before Investing in FoFs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While Fund of Funds (FoFs) offer diversification and convenience, they come with their own set of considerations. Here are the key factors investors should evaluate before allocating capital to FoFs:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1-Double-Layer-of-Costs\"><\/span><strong>1. Double Layer of Costs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>FoFs typically incur two levels of expense ratios: one for the FoF itself and another for the underlying mutual fund schemes it invests in. While SEBI has capped the total expense at 2.25% for domestic FoFs, the cumulative cost can still impact net returns, especially over the long term.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2-Past-Performance\"><\/span><strong>2. Past Performance&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>High-performing FoFs are entirely dependent on the quality of its underlying schemes. Hence, it&#8217;s important to check the track record, fund managers, asset allocation strategy, and consistency of the mutual funds the FoF invests in.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3-Investment-Objective-Time-Horizon\"><\/span><strong>3. Investment Objective &amp; Time Horizon<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Different FoFs cater to different goals, whether it&#8217;s international diversification, commodity exposure, or balanced growth. Aligning the FoF\u2019s investment mandate with your financial goals and time horizon is critical to achieving the desired outcomes.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4-Liquidity-and-Exit-Load\"><\/span><strong>4. Liquidity and Exit Load<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Though FoFs are generally liquid, some may impose exit loads if redeemed within a specific period. Additionally, FoFs mutual funds for growth investing in international or commodity funds may have delayed settlement cycles, impacting liquidity during volatile markets.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5-Currency-Risk-for-Overseas-FoFs\"><\/span><strong>5. Currency Risk (for Overseas FoFs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When investing in overseas FoFs, returns can be affected by exchange rate fluctuations. While currency depreciation may enhance returns, appreciation of the rupee against the foreign currency could reduce overall gains.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Fund of funds offers a unique proposition to investors who are risk-averse and want to minimise their risks. These mutual funds invest in the portfolio of other mutual funds, thereby providing investors with ample diversification across markets and market segments. FoFs are also a popular route through which Indian investors get exposure to foreign markets and international investing. However, they can be expensive to invest in. Reach out to your financial planner to understand if these schemes work for your risk profile.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently-Asked-Questions-Around-Fund-of-Funds\"><\/span>Frequently Asked Questions Around Fund of Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1747141757038\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"How-does-a-Fund-of-Funds-differ-from-a-regular-mutual-fund\"><\/span><strong>How does a Fund of Funds differ from a regular mutual fund?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>While a regular mutual fund invests directly in assets like stocks or bonds, a Fund of Funds invests in other funds (such as mutual funds, hedge funds, or private equity funds). This layered approach provides an extra level of diversification, but FoFs may also have higher fees due to the costs of managing both the FoF and the underlying funds.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1747141760424\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"How-are-Fund-of-Funds-taxed-in-India\"><\/span><strong>How are Fund of Funds taxed in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Fund of Funds are generally taxed as non-equity funds in India. This means that both short-term and long-term capital gains are taxed at rates applicable to debt mutual funds. Short-term capital gains are now taxed at a rate of 20%, and long-term capital gains are taxed at 12.5%.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Learn about Fund of Funds (FOF), its meaning, full form, types, advantages and tax rules in India. Discover how FOFs offer diversification and unique investment options.<\/p>\n","protected":false},"author":45,"featured_media":5588,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[9,1750],"tags":[942,943],"acf":[],"modified_by":"vanessa sequeira","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/11\/2.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5586"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=5586"}],"version-history":[{"count":13,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5586\/revisions"}],"predecessor-version":[{"id":17043,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5586\/revisions\/17043"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/5588"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=5586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=5586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=5586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}