Mutual Fund Schemes

Fund of Funds (FoFs) are a type of mutual fund that does not invest directly in stocks, bonds, or other asset classes. Instead, they invest in other mutual fund schemes or just track an ETF or index fund.

While there is no magical number, most wealth advisors and financial planners that Mint talked to recommended that 4-6 funds spread across asset classes and stock categories can take care of the majority of the needs of an investor.

If one fund in your portfolio underperforms, there's a high probability that the others may also perform similarly. Because of these overlaps, what appears to be a well-diversified portfolio may actually be concentrated.

Indian mutual funds saw their first outflows in August, totaling 18.7 billion rupees. The outflow was attributed to profit booking amid rising yields. Fund managers predict continued challenges in maintaining investor confidence as expectations for rate cuts fade.

Despite challenges like US tariffs and modest earnings, Indian retail investors remain confident, pouring a record ₹42,702 crore into mutual funds in July. This marks 53 consecutive months of inflows, contributing to a total AUM of ₹75.35 lakh crore, reflecting strong interest in equities.

The Indian mutual fund industry achieved significant growth in 2024, surpassing ₹68 lakh crore in AUM. Equity schemes contributed 45% of total assets, with sustained investor interest in small-cap and sectoral funds.

For large-cap exposure, you may want to opt for an index fund as only a few active fund managers have outperformed the index in recent years and this trend may continue in the future.

A multi-asset allocation fund should be part of a portfolio due to their ability to provide diversification across different asset classes, which helps to spread risk and potentially enhance returns.

SEBI, in its consultation paper , proposed the introduction of performance fees for funds.