The game of investing and reaping profits can be a challenging task for beginners. However, due to globalisation there are many new resources for tapping into global investment opportunities. You can rely on an international equity fund for exposure in international markets, such as the US. Interestingly, a Fund of Funds or FOF can offer an exclusive solution for pooling investments in a fund.
The fund would subsequently direct investments towards other types of funds. In simple words, the portfolio of a FOF includes various underlying portfolios from different funds. The holdings could easily replace direct investments in bonds, shares and other variants of securities. Let us learn more about the benefits of a Fund of Funds portfolio for tapping into global markets.
How Does a Fund of Funds Work?
The Fund of Funds or FOF portfolio focuses on achieving broader diversification by investing in different funds. For instance, US equity fund invests in units of overseas mutual funds and ETFs that invest in US equity. A debt fund of fund may invest in various debt schemes; similarly, an equity fund of fund may invest in a variety of equity funds. FOF strategy could offer multiple competitive advantages. It can help you allocate efficiently with investments from different fund categories.
You can come across different FOF options with the flexibility of tapping into varied investment schemes. A Fund of Funds can be a hedge fund, equity fund, investment trust or mutual fund. On top of that, a FOF portfolio invests only in portfolios that are under the management of one specific investment company. At the same time, FOF could also enable investments in external funds that are subject to control by other managers from different companies.
What are the Benefits of a US Fund of Funds?
Fund of Funds or FOF strategy is an ideal multi-manager investment strategy that helps investors achieve better exposure. It can help capitalise on the benefits of an international equity fund with limited risks compared to direct investments in securities or individual funds. Investment in FOF portfolios could offer professional wealth management services to investors.
In addition, investors with limited capital could also make the most of diversified portfolios with various underlying assets. This advantage ensures that beginners can tap into the advantage of different portfolios that are out of the reach of average retail investors.
Bandhan US Equity Fund of Funds may be a suitable international mutual fund investment. It offers capital appreciation through investment in overseas ETFs and mutual fund units.
At the same time, it is important to remember that Fund of Funds can be high-risk mutual funds with possibilities of vulnerability to currency fluctuations and exchange rate risks. Consult with professionals and find the ideal strategies to maximise your FOF portfolio.