fund of funds


A mutual fund which invests in other mutual funds. Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds. These funds were designed to achieve even greater diversification than traditional mutual funds. On the downside, expense fees on fund of funds are typically higher than those on regular funds because they include part of the expense fees charged by the underlying funds. In addition, since a fund of funds buys many different funds which themselves invest in many different stocks, it is possible for the fund of funds to own the same stock through several different funds and it can be difficult to keep track of the overall holdings.

Use fund of funds in a sentence

The fund of funds was held together, not by just a few, but many mutal funds brought together by an elite group of investors.

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Mutual funds often purchase stocks in the stock market and can show profit based on how much the stocks value has increased, someone that is investing in a fund of funds lowers their overall exposure to specific sectors of the market by investing in a diverse fund of funds they can be investing in agriculture, technology, and utilities which allow the user to have a more diverse portfolio.

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A fund of funds does not invest directly in individual stocks or bonds, but rather in other open-end mutual funds or exchange-traded funds. This may allow for greater diversification, it also may have overlap, as the holdings of the underlying funds are not taken into account, and it may be more expensive, as both the "wrapper" fund and the constituent funds have fees and expenses.

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