1. What is the procedure to invest in FoF? Do we have any additional fees in it? If yes how much it would be? 2. Are ETF fund and index fund same or different? Can a index fund be a ETF fund as well? For eg; Kotak Nifty ETF fund is a large cap fund but it is categorized as both index and ETF. Please clarify?
1. A fund of funds is a mutual fund which instead of directly investing in equity and debt market securities invest in other mutual fund schemes, based on its investment objective and strategy. Asset allocation funds, International Funds, Gold Funds etc are typical examples of fund of funds. The procedure of investing in Fund of Funds is like any other mutual fund schemes. You can get in touch with a financial advisor or a mutual fund company to invest in fund of funds. You can also invest online. One of the major drawbacks of fund of funds is the fees. In a fund of funds, the investor apart from paying for the expenses of the underlying mutual funds, also have to pay for the expense of fund of funds. The additional fees can be as high as 0.75%.
2. ETFs and index funds though similar in terms of the nature of investment actually quite different. The difference between ETFs and Index Funds are listed below:-
Different research agencies may have different categorizations for ETFs and Index Funds depending on their own categorization methodologies. However, you will be able to understand whether a scheme is an ETF or index fund by carefully reading the scheme information document. For example, Kotak Nifty ETF is an ETF and not an index fund. Examples of index fund are ICICI Prudential Index Fund – Nifty Plan, UTI Nifty Index Fund, Birla Sun Life Index Fund, SBI Magnum Index Fund, Principal Index Fund, Franklin India Index Fund – NSE Nifty Plan, HDFC Index Fund – Nifty Plan etc.
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