Are multi-asset funds a good investment?
Investors can benefit from debt, equity, and alternative assets, such as gold, real estate, etc., in a single multi-asset fund. It also allows investors to expand their portfolio beyond traditional assets without stressing how much to allocate to each class or when to undertake portfolio reevaluation and rebalancing.
Thus, multi asset fund can be considered as an easy access to a diversified portfolio of equity, fixed income and gold in a process driven and tax-efficient way. It aims to provide optimal asset allocation based with the objective to maximise return and minimise risk for optimising risk adjusted returns.
You should therefore only keep as many funds in your portfolio as you're comfortable monitoring. For example, if you hold 10 or 20 different funds, you'll need to keep a close eye on the changing value of all these investments to make sure your asset allocation still matches your investment goals.
Multi-asset strategies offer flexibility to meet investment goals with broad options for investing across sectors, and more diversification than other investment strategies. An investment strategy that works well for one person may not be the best fit for another.
Splitting your risk across different kinds of assets can help to smooth out your investment returns over the long term. Staying invested, rather than frequently moving in and out of markets, can also help to keep costs low and enhance long-term returns from a diversified mix of investments.
Inflation is rising, interest rates are high and there is a lurking fear of recession. In times like these, multi asset funds are considered a safe bet for stable returns. Multi asset mutual funds are those than invest the corpus across multiple asset classes like equity, debt and commodities.
Multi Asset Funds are relatively less risky and volatile. However, don't be under the impression that they are totally risk- free. They also invest in stocks and stocks are risky and volatile in the short term. That is why we always ask investors to enter in these schemes with a minimum horizon of five years.
Yes, it can make sense to invest in multiple index funds as part of a diversified investment portfolio. Diversification is an important investment strategy that can help reduce overall risk and increase potential returns.
While mutual funds are popular and attractive investments because they provide exposure to a number of stocks in a single investment vehicle, too much of a good thing can be a bad idea. The addition of too many funds simply creates an expensive index fund.
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
Which is better multi asset fund or balanced advantage fund?
If you are a new investor or are risk-averse, go for balanced advantage funds. Multi asset allocation funds can be a convenient option but do assess whether you need to invest in gold or not and if yes, do explore other gold-related investment options.
Multi Asset Allocation Funds are hybrid funds that must invest a minimum of 10% in at least 3 asset classes. These funds typically have a combination of equity, debt, and one more asset class like gold, real estate, etc.
Multi asset portfolios often focus on delivering predefined outcomes for clients, which could be in the form of total returns or stable income streams. As the name would suggest, they do this by investing in a range of different asset classes - including equities, bonds, cash and alternatives.
For example, if the average yield is 3%, that's what we'll use for our calculations. Keep in mind, yields vary based on the investment. Calculate the Investment Needed: To earn $1,000 per month, or $12,000 per year, at a 3% yield, you'd need to invest a total of about $400,000.
Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even cryptocurrencies in the asset class mix.
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Funds often come in themes, like collections of shares in sustainable companies, properties in America, or bonds from European governments. Some investors pick and mix about 8–20 funds and make a portfolio.
As stated above, money market funds are often considered less risky than their stock and bond counterparts. That's because these types of funds typically invest in low-risk vehicles such as certificates of deposit (CDs), Treasury bills (T-Bills), and short-term commercial paper.
Equities are generally considered the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the successes and failures of private businesses in a fiercely competitive marketplace.
If it is done before April 1, 2023, gains are taxed at 20 per cent after providing the benefit of indexation if held for more than three years, otherwise they are added to the income and taxed as per the applicable slab.
What type of fund is the most risky?
Equities and equity-based investments such as mutual funds, index funds and exchange-traded funds (ETFs) are risky, with prices that fluctuate on the open market each day.
In fact, a number of billionaire investors count S&P 500 index funds among their top holdings. Among those are Buffett's Berkshire Hathaway, Dalio's Bridgewater, and Griffin's Citadel. An S&P 500 exchange-traded fund (ETF) is the easiest way to get exposure to the broad market.
Diversification is an important factor, and you'll want to balance having too much in one type of asset. For example, many experts recommend having an allocation to large stocks such as those in an S&P 500 index fund as well as an allocation to medium- and small-cap stocks.
There isn't a strict rule, but between five and 10 funds is usually a good idea. That lets you allocate money to different types of funds and markets without doubling up too much. It's also a manageable number to monitor and won't cost you too much in trading fees.
| Mutual funds | 1-year return (%) |
|---|---|
| Axis Value Fund | 40.16 |
| SBI Long Term Equity Fund | 40.00 |
| HDFC Multi Cap Fund | 40.19 |
| Kotak Multicap Fund | 39.77 |
