A Fund of Funds invests in other mutual funds rather than investing directly in stocks, bonds or other securities. An FOF Scheme of a primarily invests in the units of another Mutual Fund scheme. It provides diversification across fund managers and strategies but comes with slightly higher costs due to layered expenses. A retail investor can avoid such schemes. However, an investor with a sizeable portfolio can consider investing a small portion of their portfolio in FoFs to capture multiple themes under a single scheme.
