Everything about Fund of Funds, GETF and Offshore Schemes
Created on 05 Nov 2020
Wraps up in 5 Min
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Having a limited amount of money as savings often leads to confusion about where it can be invested or kept aside. People with any amount of savings often come across questions like, "Should I store it in the house? Should I put it in the bank? Or should I keep that money in the bank as a fixed deposit(FD) with a lock-in period?"
All the above-mentioned options can be optimal choices to store the savings if one wants to keep the money aside without taking any risks or even in a Fixed deposit account with minimal returns.
However, there is one more option that is considered as probably the best of the lot. This option can come with some associated risk, but often gets higher returns on the investment.
And that option is a mutual fund.
A mutual fund might be the right choice for individuals with limited sources of money. A mutual fund offers a variety of options to its investors according to their financial goals.
Here, we will talk about those other mutual fund schemes that tend to offer maximum returns to their investors. Investors invest in these schemes when they have a limited resource of liquidity.
Other Mutual Fund Schemes: These fund schemes tend to offer maximum return with minimal risks to their investors with limited liquidity resources.
Here are some fund schemes. Let's take you through them one by one.
Gold Exchange Traded Fund (GETF)
As the name suggests, a Gold Exchange Traded fund is commodity-based. In this scheme, the manager invests in assets like gold and other utilities where these exchange-traded funds behave like individual stock and are traded the same way on the stock exchange.
These assets are traded in the physical form of gold or on paper, and investors get a chance to invest in the stocks of gold instead of actual gold. Once the trade of gold is done, investors get their respective units of gold in their account instead of actual gold, wherein each unit contains 99.5% pure gold.
GETF offers short-term investments to their investors. In case an investor wants to withdraw their amount, they can easily do so. For example, if an investor is having doubts about a possible market fall, they can pull out their investments to avoid any loss.
The investors who wish to explore the actual gold moment in the market and have a long-term investment mindset can invest 5-10% of their investment to make their portfolio steady and to get stable returns.
The gold industry has been showing rapid growth in the past few years that makes the Gold Exchange Traded fund a valuable and attractive investment with 0.5-1% of brokerage charges.
Fund of Funds (FOF)
This fund scheme invests in various sectors of the market to get higher returns with minimal risks. Investments in various sectors mainly depend on the financial goals of the fund manager for their investors.
If the main focus of the fund manager is to get a higher yield/returns/interest rate, he will invest where he can get any or all of that even if it comes up with a higher risk.
And if the main focus is to gain steady and stable returns, then the fund manager invests where he can get these steady returns associated with minimal risks.
The fund of funds (FOF) schemes can invest in domestic or international funds, as per the financial goals of their investors that need to be fulfilled by the AMC (Asset Management Company). Investments in domestic and international funds diversify the investor's portfolio.
A FOF scheme is managed by highly trained professional market analysts that ensure investing in funds as per the financial goals of their investors and avoid any possible risks, by making accurate predictions and analysis of the market.
This fund charges a higher expense ratio as it offers a highly effective management team that manages the portfolio.
FOF schemes might be ideal for those investors who have limited liquidity resources to invest, as this scheme's main aim is to offer higher returns to their investors, with minimum associated risks.
Funds Investing Abroad (Offshore Schemes)
This fund is also called the international fund as the fund manager invests in international or regional markets like equity/stocks, or securities of fixed income. Investors need to invest in their domestic currency after selecting the right fund.
There are various companies that are growing rapidly around the world but are not listed in India. This fund invests in those companies that are listed in foreign countries through these offshore schemes.
These offshore funds are regulated by the RBI (Reserve Bank of India), which ensures that investors do not lose their money and are offered stable and steady returns.
The structure of this fund scheme is similar to open-ended funds in which investors can buy and sell at any point in time, which makes this fund more attractive to those investors who wish to invest in the foreign market to gain higher returns with minimal risks.
This fund scheme offers the diversification of portfolio investments that ensure that if the domestic economy goes down, it won't affect the investor's international investments. These schemes offer the investors a better return according to the foreign markets.
Through these types of mutual fund schemes, investors can explore various sectors and make their portfolio stable with steady returns, as these fund schemes invest in various sectors that ensure access to high-value funds.
These fund schemes tend to focus on providing maximum returns to their investors who have limited liquidity resources by investing in various markets. They also offer international investments for those investors who see potential in foreign companies and wish to invest in them.
However, as always advised, before investing in any of such mutual funds schemes, investors should have prior knowledge of the mutual funds' industry in order to make the right choice. These schemes do have the capability to offer higher returns, but one must remember that higher returns come with higher risks.
Investors with limited liquidity resources can get higher returns in these schemes, and that makes these mutual fund schemes a popular investment option.
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