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Beginner Investing/One Fund & Numerous Funds

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Question
Hello:

Some mutual funds are comprised of other mutual funds. These are called fund of funds.

Will an investor earn more if he invests in each of the individual funds inside of the fund, or will he earn more if he invests in just the one fund that has all of the funds in one?

I thank you for your reply.

Answer
Hi Kenneth,

It would depend on the specific fund of funds.  Most fund of funds have high expense ratios, which will reduce the returns of the investment. Vanguard is probably the exception since their expense ratios are always among the lowest in the industry.

I hope this helps

Michael Weiss, CFA
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Michael Weiss, CFA

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I am the owner of Series 7 Exam Tutor , a financial tutoring business that provides personalized tutoring for the Series 7 Exam, the Series 6 Exam ,the Series 65 Exam, the Series 66 Exam, the Series 63 Exam and the Series 24 Exam . I also offer tutoring for finance courses. For additional information, please visit, Finance Exam Tutor. Prior to launching Series 7 Exam Tutor, I worked in investments for 20 years with the majority of this time focused on investment analysis and portfolio management. I have worked for large companies such as Merrill Lynch and Evergreen Investments and have also worked for smaller firms as well. Throughout my career, I have sought to mentor younger colleagues whenever possible, especially those enrolled in the CFA program. I completed the CFA program in 2002 after passing all three exams on the first try. I also passed the Series 7 Exam with a score of 94%. For additional information about me, you can visit the links below:
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