Fund of funds

A fund that invests in other funds rather than in securities

In detail

Instead of individual stocks or bonds it buys whole funds and holds them. A small sum reaches a wide spread of assets, but the outer fee and the fees inside the underlying funds stack up, which makes the true cost hard to see. The prospectus states the combined figure.

Example

An outer fee of 0.3% over underlying fees of 0.5% means bearing about 0.8% a year.

Related terms

Investment fund Expense ratio Total cost of ownership

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For learning, not investment advice. Decisions are your own.