Are Fund of Funds, multi manager funds a good option?

Are Fund of Funds and multi manager funds a good option to get the best of all AMCs and asset classes? Which are the best FOF and multi manager funds in India to invest for three to five years?
---Amber Agarwal

Raghvendra Nath, MD, Ladderup Wealth Management, responds:

There are basically three types of fund of funds and multi manager funds. First, equity-oriented fund of funds that invest in equity schemes of various fund houses. Second, debt-oriented fund of funds which invest in various debt units of various fund houses. And third is an asset allocator fund of funds which basically have a mixture of both debt and equity in various proportions.

For a retail investor who doesn’t want to manage too many schemes and wants to keep his investments simple, the asset allocator fund is most suited. It helps to reduce the market volatility and provide stable returns.


However, if you increase your investment horizon and do separate allocations as per your goals, you would have more liquidity and better returns.