Fund of Funds (FOF): Best Fund of Funds in India

What is a
Fund Of Funds?

A Fund Of Funds (FoFs) is like a mutual fund that invests in other mutual funds. It helps investors diversify by spreading their money across various funds for better risk management.

Advantages of Fund Of Funds

Easy diversification

FoFs spread your money across different Mutual Fund rather than investing directly in stocks, bonds, gold, etc. for diversifying your portfolio.

All-in-one solution

Instead of managing many funds, choose FoFs and invest in multiple mutual funds. Save time and effort without compromising on growth.

International exposure

With a Fund of Funds, you can invest in international markets as many funds invest in foreign mutual funds.

Types of Other Funds

Equity Fund

Seek stable returns with less volatility. Explore various equity funds below tailored to your investment horizon and preferences.

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Fund Of Funds returns Calculators

Know how much your investment can yield and plan for your goals. Use the Aditya Birla Sun Life Mutual Fund (ABSLMF) calculator for quick calculations.

SIP

Invest systematically in regular amounts and build a corpus for your financial goals with steady investments.

Lump sum

Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.

Calculate SIP Amount
Calculate Portfolio Value

TARGETED EARNINGS

Investment Period (1 to 30 Years)

Expected Returns (8 to 20%)

MONTHLY SIP AMOUNT

Investment Period (1 to 30 Years)

Expected Returns (8 to 20%)

Monthly SIP Amount

₹ 0

Total Amount Invested

₹ 0

Expected Wealth Gain

₹ 0

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ABCD - One app to build a diversified

Invest in mutual funds online with the ABCD app and build your portfolio one click at a time.

A choice of different types of mutual fund schemes
Online investments with a fully integrated digital platform
Facility to switch, redeem and invest more from a single platform

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Understanding Fund of Funds

Table of Contents

What are Fund Of Funds?What are the features of Fund Of Funds?What are the different types of Fund Of Funds?Who should invest in Fund of funds?What is the tax implication of Fund of Funds?What are some drawbacks of Fund Of Funds?

What are Fund Of Funds?

Fund Of Funds are mutual fund schemes which invest in other mutual fund schemes to give you better diversification and exposure to different types of asset classes. There are different types of Fund Of Funds which you can choose from based on your investment strategy.

What are the features of Fund Of Funds?

Invests in one or more mutual funds.
FoFs can invest in different asset classes by choosing different funds.
International and gold investments can be done through FoFs.
Different types of schemes for different investor preference.
Easy liquidity without any lock-in period

What are the different types of Fund Of Funds?

Multi-asset or asset allocator FoFs

Invest across different asset classes.

International FoFs

Invest in international mutual fund schemes.

ETF-based FoFs

Invest in different types of ETFs.

Gold FoFs

Invest in gold ETFs.

Who should invest in Fund of funds?

New investors who lack the expertise of managing their portfolios.
Investors with smaller capital but looking to invest in multiple mutual fund schemes.
Investors who want portfolio diversification.

Who should buy a Savings Plan?

Equity-oriented funds

If a FoF invests at least 90% of its portfolio in equity funds which, in turn, invest a minimum of 90% of their portfolio in equity, the FoF would be considered as an equity-oriented fund.

• Returns earned within 12 months of investment would attract short-term capital gains tax of 15%
• Returns earned after 12 months of investment would be tax-free up to Rs.1 lakh
• Returns exceeding Rs.1 lakh are taxed at 10%

Debt-oriented funds

All other FoFs would be treated as debt funds for taxation purposes.

• Returns earned would be taxed at your income tax slab rates

Dividend income is taxed at your income tax slab rates

What are some drawbacks of Fund Of Funds?

You don’t control the choice of mutual funds into which the portfolio invests
There is a possibility of the portfolio being duplicated
The expense ratio is on the higher side

LI Retirement Plan

Secure retirement with Life Insurance

Secure regular pensions
Save on taxes

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ULIP

Invest and secure with ULIPs

Market-linked returns
Flexibility: withdraw, switch, top up

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FAQs On Fund of Funds

A Fund Of Funds (FOF) is a mutual fund that units of other mutual fund schemes. FOFs may invest in domestic mutual funds or extend their portfolio to include international funds. These funds might allocate their investments across distinct schemes in equity, debt, or gold categories, or follow an asset allocation strategy involving a combination of equity, debt, and occasionally gold. If a Fund Of Funds invests in a foreign fund, it transforms into an international fund.

Gold Funds: Utilize the fund-of-fund approach, investing in gold ETFs without needing a demat account.

Asset Allocation Funds: Provide diversification across different schemes from various asset classes. They can be dynamic, adjusting allocations based on market valuations, or fixed, labeled as aggressive, moderate, or conservative. Multi-asset funds strategically allocate to equity, debt, gold, and cash.

International Fund Of Funds: Invest in existing foreign funds, allowing Indian investors access to foreign equity funds. They carry market risk in the targeted country or theme and currency risk due to conversion volatility during fund deployment in foreign markets.

Investors find a Fund Of Funds beneficial as it allows them to hold a collection of funds at once, whether in an asset-allocated basket or one requiring dynamic management in terms of asset allocation. This becomes convenient, especially with smaller sums, enabling exposure to multiple funds. Gold funds and international funds also offer advantages, as discussed earlier.

There are various advantages to investing in a Fund Of Funds –

Fund Of Funds targets various best-performing Mutual Funds in the market, each specializing in a particular asset or sector of the fund. This ensures gains through diversification, as both returns and risks are optimized due to underlying portfolio variety.

Fund Of Funds is managed by highly trained individuals with years of experience. Proper analysis and calculated market predictions made by such portfolio managers ensure high yields through intricate investment strategies.

An individual with limited financial resources can easily invest in the top Fund Of Funds available to earn higher profits. Monthly investment schemes can also be availed while choosing a Fund Of Funds to invest in.

Yes! Fund Of Funds is a good investment option for beginners looking for low-risk investment products. However, it is crucial to comprehend their functioning, taxation, and other features before considering an investment in them.

The distinguishing features between Fund of Funds (FoFs), mutual funds, and ETFs can be summarized as follows:

	Fund of funds	Mutual funds	ETF
What do they invest in?	One or more mutual fund schemes that in turn invest in securities; whose objective aligns with the objective of the FoF	In equity, debt or other securities, as per the objective and investing strategy of the fund.	Securities that are comprised in the underlying index
Return objective	To earn returns commensurate with the returns of the selected funds that it invests in	Objectives differs from fund to fund – such as to earn long term capital appreciation, regular income for its investors etc	To mimic returns of the benchmark index
Mode of investment	Invested at NAV – either through AMC or through demat	Invested at NAV – either through AMC or through demat	Trade like shares – can be bought and sold at ‘real-time’ prices on the stock exchange through trading account
Need for demat	Demat account is not mandatory to invest	Demat account is not mandatory to invest	Demat and trading account is a necessity