Understanding Fund of Funds

Funds of funds (FoF) are investment vehicles that invest in other funds. A fund of funds strategy combines the benefits of both mutual fund investing and private opportunities. Typically, a fund of funds invests in several funds in order to provide investors with the diversification and access to numerous market segments. It is a great way for investors who are not experts on picking specific stocks to still invest in a diversified portfolio.

Funds of funds typically focus on one type of fund such as equity or bonds. Therefore, if you want the best of both, you should look into a fund of funds that has both the equity and bond funds. It is important to note that each fund of funds has its own target asset allocation, fees, and risk levels. Therefore, if you are investing in a und of funds, you should do your research to ensure it is the right fit for your portfolio and goals.

Advantages of Fund of Funds

Investors who are new to investing or do not have the time to research and actively manage a portfolio on their own can benefit from investing in a fund of funds. Since it is a professionally managed portfolio, you do not have to worry about researching and selecting individual investments. Furthermore, funds of funds are able to offer access to investments that may not be available to individual investors.

An added benefit of investing in a fund of funds is the lower fees involved. Since the fund of funds is investing in multiple funds, costs are spread out between the various funds within the fund of funds. This can result in significant cost savings for investors.

Examples of Funds of Funds

Some examples of funds of funds include the Vanguard Diversified Equity Fund, Dimensional Variables Equity Fund, and the Goldman Sachs Fund of Funds. Every fund of funds has its own target asset allocation, fees, and risk levels. Therefore, it is important to thoroughly research each fund before investing.

Funds of funds provide investors with a wide variety of options, including investments that may not be available or accessible to individual investors. As with any investment, however, you should do your research to make sure that the fund you are investing in meets your goals and objectives.