Funds of funds (FoFs) are mutual funds that invest in other funds. Unlike funds that directly invest in stocks, commodities or other asset classes, FoFs invest in other funds that make direct investments or other FoFs.
FoFs aim to provide a higher level of diversification by investing in various fund categories like growth funds, foreign equity funds, gold funds, bond funds, etc.
FoFs that invest only in funds made by their own company are called fettered FoFs, and if an FoF invests in any fund, it is called an unfettered FoF.
Read more: ETF vs FOF: What are the major differences?
