A Fund of Fund, commonly known as FoF will invest in some other mutual funds, which means you will eventually invest in mutual fund schemes, via an indirect way. It is known that a mutual fund manager puts investors' money in company stocks or securities. A Fund of Fund (FoF) will invest in those mutual funds, so that is linked with the equity markets only, but indirectly. However, FoFs are referred to as non-equity schemes for taxation. So, these investments will not able to get zero long-term capital gains tax. Motilal Oswal Nasdaq 100 FoF, Kotak Asset Allocator, Quantum Equity FoF are some popular FoFs, available in the country.
Nippon India Mutual Fund (NIMF) launches first silver FoF
Nippon India Mutual Fund (NIMF) has launched India's first Silver FoF, along with their Silver ETF. For Nippon India Silver ETF, the minimum investment will be Rs. 1,000, and for the Silver ETF Fund of Fund (FoF), the minimum investment will be Rs. 100. Both of these above-mentioned schemes will open on January 13 and will close on January 27, 2022. Through the NIMF silver FoF, investors will be able to participate without the need to have a Demat account and can also opt for Systematic Investment Plans (SIPs).
What is silver ETF and silver FoF
A silver ETF will generally invest in physical silver (99.9% conforming to London Bullion Market Association) and silver-related instruments. So, the silver ETF will perform depending on the ups and downs of the domestic price of silver (based on LBMA Silver daily spot-fixing price). On the other hand, The Nippon silver ETF FoF will seek to provide returns that closely correspond to returns provided by Nippon India Silver ETF by investing in units of Nippon India Silver ETF.
Investing in ETFs or FoFs (gold/silver) assures the investors of hassle-free storage, investing in small denominations, no fear of theft, easy liquidity, whereas holding physical gold/silver imposes the burden of storage and liquidity.
Hemen Bhatia, Head ETF, Nippon India Mutual Fund stated, "Historically, Silver has a relatively low correlation to Indian Equity Indices and hence, it will provide an opportunity to investors to diversify their portfolio as part of their asset allocation." During 2021, the gold market remained a bit subdued than in 2020, while silver players an important role for the investors. Hence, if you are looking for alternative investment instruments, these silver ETF and silver ETF FoF can be explored.