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One-minute guide to understanding a fund of funds

One-minute guide to understanding a fund of funds
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First Published: Tue, Jan 12 2010. 10 03 PM IST
Updated: Tue, Jan 12 2010. 10 03 PM IST
0-15 seconds
What am I?
I am a fund of funds scheme, quite like any other mutual fund (MF) scheme. You invest in me and I deploy your money in the markets to help it grow. You can put in as much money as you like but I expect Rs5,000 to begin with.
15-30 seconds
What sets me apart?
I am not like your typical MF scheme though. While other MF schemes invest in shares and bonds directly, I invest in other MF schemes. Some of my clones invest in equity schemes and some in debt. You should go for a mix of both types of MF schemes.
30-45 seconds
Why not invest in markets?
Not only is it tough to consistently pick winning scrips over the long-term, it is a challenge to pick winning MF schemes (that in-turn invest in them) consistently. So just like other MF schemes help you diversify across stocks and bonds, I help you diversify among MFs. I am an alternative to investing in individual MF schemes.
45-60 seconds
What’s my downside?
My tax treatment can hurt you as an investor. I am treated like a debt fund even if I invest everything in equities. An additional expense ratio of 0.75% that I charge you, in addition to what the underlying schemes charge, also adds to your burden.
In India, it’s not a good idea to come to my door. At least not yet.
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First Published: Tue, Jan 12 2010. 10 03 PM IST