Fund of funds.
In plain English
A fund of funds holds other mutual funds or ETFs instead of individual securities. Target-date retirement funds are the most common friendly example: one fund that owns several underlying index funds and shifts the mix over time. The convenience is real, one holding for a diversified, managed portfolio, but the structure can stack fees: you pay the fund of funds' own fee plus the fees of the underlying funds. For low-cost target-date index funds this layering is tiny; for actively managed or alternative funds of funds it can be a serious, easily missed drag.
01Why it matters
A fund of funds offers one-decision diversification, but the layered fees can quietly double your costs, so knowing to check the total expense is what keeps it from eating returns.
02The math, step by step
A fund of funds charges 0.15 percent and holds underlying funds averaging 0.10 percent, so your true cost is about 0.25 percent. On a 100,000 dollar balance that is 250 dollars a year, more than either layer alone suggests.
03What this is NOT
A fund of funds does NOT charge just one fee. You pay its fee plus the fees of the funds it holds, so the total cost can be higher than the headline expense ratio implies.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.