Define the fund of funds scheme and state the benefits of the scheme.

As per SEBI (Mutual Funds) Regulations, 1996, a Fund of Funds (FoFs) is a mutual fund scheme which invests in the schemes of the same mutual funds or other Mutual Funds. These funds can invest in equity-oriented, debt-oriented, liquid schemes, or sector-specific schemes depending on the investment style of the fund managers. Benefits of Fund of Funds scheme: Diversification: As a fund of funds invests in the schemes of other funds, it provides a greater degree of diversification. Uncomplicated: Instead of investing in different stocks/units of mutual funds and keeping track of all of them, it is much easier to invest in and track only one fund, which in turn invests in other mutual funds. Cheap: While entering the capital market, it is difficult to diversify with limited funds. Fund of funds provides an opportunity for diversification with a comparatively limited amount. Risk: Investors can trim down the risk by choosing this route. Because of diversification, even if one stock/scheme is not performing well, the overall risk level comes down. Expertise of various Managers: Similar to other mutual fund schemes, fund of funds schemes also operate under the due diligence of a fund manager. This provides the scheme with additional expertise compared to other mutual fund schemes and offers access to information that might be difficult for an individual investor to obtain.