Fund of Funds has given returns of more than 12% in 5 years and more than 40% in last 1 year, so should you invest in such fund?
FUND of FUNDS: If you have limited capital and you are going to invest in mutual funds for the first time, then Fund of Funds schemes can prove to be better for you, as it will help you to diversify your portfolio. Know what is Fund of Funds (FoF) and what are its advantages and disadvantages. According to experts, if you want to redeem within five years, then stay away from investing in such funds.
What is Fund of Funds (FoF)
This is a fund within which there are many mutual funds. A mutual fund invests its pooled money in another mutual fund (one or more), this is called a fund of funds. While investors can also invest in different funds, they have to track all the funds separately, whereas Fund of Funds simplifies the process as investors need to track only one fund. it occurs.
Fund of Funds Types
Asset Allocation Fund of Funds: This type of fund of funds invests in a variety of asset classes ranging from commodities and metals to classic equity-oriented and debt-oriented mutual fund schemes.
Multi Managed Fund of Funds
Through this type of fund, investments are made in different types of funds and a single investment portfolio is made of such investments.
International Fund of Funds
They mainly invest in such international mutual fund schemes consisting of shares or bonds of global companies.
Gold Fund of Funds
These types of funds invest in physical gold as well as stocks of gold mining companies.
how much is the tax
20% Long-Term Capital Gain (LTCG) tax is applicable on selling the unit after 36 months and STCG tax as per the tax slab is applicable for capital gains in 36 months. Income from dividend is added to the income of the investor and tax has to be paid according to the slab. 10% TDS is deducted if the dividend received in a year exceeds Rs.5,000.
Expense ratio
Unlike other mutual fund schemes, these types of schemes carry a high cost. In addition to administrative and general management fees, these incur an additional cost.
what should be taken care of
Start investing after deciding your risk appetite and the amount to be invested. Choose an experienced fund manager only. These schemes invest in multiple funds, and these funds also invest in multiple securities, so your investments may either be overlapping or over-diversified. In such a situation, Gold FoF is considered to be a better and more secure option, because there is no sharp fluctuation in the price of gold as compared to the market.
