Mutual funds have become a popular tool for young as well as seasoned investors. No one wants to invest in fixed income securities anymore, especially after the interest rates witnessing a sharp decline in the past few years. The problem with conservative schemes is that they offer low interest rates and lock the investor’s money in for a longer duration. On the other hand, mutual funds do not have any lock-in period. Investors can enter or exit mutual fund investments at any given time. There is no entry or exit load, thus making mutual funds a cost effective investment option.
If you want to invest in a mutual fund scheme that invests in multiple funds and one that offers high liquidity, you can invest in an ETF FOF. Before understanding what an equity FOF is, let’s just understand what an ETF and FOF individually mean.
Exchange Traded Funds or ETFs as they are commonly referred to as are mutual funds that can be publicly traded just like company stocks. ETFs are listed at the stock exchange and their units are available for purchase and sell at their current live market price. An ETF is a basket of securities comprising of stocks that form a specific index or benchmark. ETFs may track an index, a commodity, or foreign securities as their benchmark.
A Fund of Fund (FOF) is a mutual fund scheme that tries to generate returns by investing in other mutual fund schemes. The fund manager of a FOF scheme buys units of other mutual funds to achieve the scheme’s investment objective. A FOF may invest in domestic funds or it may invest in international mutual funds as well.
Axis Equity ETFs FoF – An open ended fund of fund scheme predominantly investing in units of domestic equity ETFs.
The investment objective of the scheme
The investment objective of the fund is to provide long-term capital appreciation from a portfolio investing predominantly in units of domestic equity ETFs. There is no assurance that the investment objective of the Scheme will be realized. However, there can be no assurance that the investment objective of the Scheme will be realized.
Why should you consider investing in Axis Equity ETFs FoF?
Investors are often looking for a scheme that can give them long term gains as well as capital protection. By investing in Axis Equity ETFs FoF, they get the benefit of both. Let us find out how –
This fund invests in not one but multiple domestic ETFs. This way investors get exposure to a portfolio that invests in stocks belonging to companies of various sectors and industries spread across market capitalizations. Investors should not worry about market volatility because even if one sector or industry underperforms, other investments can even out the losses.
Also, since this is an equity oriented scheme, investors can expect capital appreciation over the long term. When you invest for a longer duration you not only have the chance of earning better returns but you can also mitigate the investment risk by buying more units when the NAV is low and averaging out your total cost of purchase. You do not have to invest all at once. You can make a lump-sum investment at various intervals depending on the performance of the scheme and its fluctuating NAV.
Returns from mutual fund investments are not guaranteed and all mutual funds have investment risk. Please talk to your financial advisor before investing.