Why use a multi-asset fund?
Multi-asset class investments increase the diversification of an overall portfolio by distributing investments throughout several classes. This reduces risk (volatility) compared to holding one class of assets, but might also hinder potential returns.
Multi-asset funds can offer investors exposure to a broader range of assets, sectors, strategies and direct investment exposures (e.g. individual securities, bonds) with greater flexibility. They are diversified across both traditional and non-traditional asset classes, such as real estate and infrastructure.
By definition, multi-strategy funds engage in a variety of investment strategies. The diversification benefits help to smooth returns, reduce volatility and decrease asset-class and single-strategy risks.
Diversification matters because some investments will perform well at a time when others don't do as well, so they may help to balance each other out. Please note, diversification may not be appropriate for every investor.
Multi asset allocation funds have offered an average return of around 3.39% in 2024 so far and topped the return chart across all hybrid categories, data crunching by ETMutualFunds showed. There were around 16 schemes in the multi asset allocation category.
Investors may not be able to select specific investments within the asset classes included in the fund, which may limit their ability to customise their portfolio to their specific investment goals and risk tolerance. Another potential drawback is performance.
Investors seeking long-term capital appreciation, while avoiding concentration of their investment holdings in a single category and minimizing exposure to unwarranted risks and ongoing volatility, may find multi-asset allocation funds worth considering.
Multi-asset allocation funds provide investors with a single investment that combines debt, equities, and one additional asset class such as real estate, gold, and so on. Furthermore, these schemes employ various asset allocation algorithms that are designed to respond to changing market situations.
The whole purpose of holding multiple stocks in a portfolio is diversification. That means holding enough securities so that a big drop in one won't cause your entire portfolio to take a big hit.
Multi-asset funds are available on platforms* and their structure enables them to invest widely. This greater choice can also contribute to lower costs. Model Portfolios are available on platforms*. But platform technology sometimes restricts them from holding some types of investments.
Is it better to invest in multiple funds or just one?
Investing in a single fund has more volatility than investing in several funds. By investing in multiple mutual funds, you can spread out the risk associated with any one fund and reduce overall volatility.
"The biggest benefit to having multiple accounts is your ability to absorb and partner with multiple professionals, all seeking to achieve the same goal," Voyles says. It's common for financial goals to fluctuate throughout your lifetime.
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.
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.
- Lower Portfolio Volatility.
- Returns Optimization.
- Helps Achieve Financial Goals.
1. Risk Management: Asset allocation helps you manage risk by diversifying your investments across different asset classes, reducing the impact of poor performance in any one area. 2. Volatility Reduction: A balanced asset allocation can help smooth out the volatility of your portfolio, making returns more predictable.
A multi-asset investment strategy can be accomplished by investing in a variety of asset classes – such as stocks, bonds, real estate, credit, or cash – to create a more nimble and broadly diversified portfolio.
Fixed income and equity funds may feature a range of different securities but multi asset income offers flexibility across all asset classes. They can change their allocations to equities, bonds and alternative investments depending on the economic environment and where investors see the greatest opportunities.
The FactSet multi-asset class (MAC) risk model is based on a Monte Carlo simulation of the joint distribution of the future portfolio returns, which allows for calculation of various risk statistics such as Tracking Error Volatility (TEV), Value-at Risk (VaR), and Expected Tail Loss (ETL), as well as other ...
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.
What is the best asset allocation strategy?
A popular approach is the 100 Rule: Subtract your age from 100 and allocate the result as a percentage of stocks. This is because the younger you are, the higher the risk tolerance and longer the time horizon, while the inverse is true for those closer to retirement age.
100% Asset Allocation
Another option for the best asset allocation is to use the 100% rule and build a portfolio that's either all stocks or all bonds. This rule gives you two extremes to choose from: High risk/high returns or low risk/low returns.
Multi Asset Allocation Funds can provide you tax efficient exposure to gold, while optimizing asset allocation to equities and debt for your long term investment objectives. Investors should consult with their financial advisors, if Multi Asset Allocation Funds will be suitable for their investment needs.
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.
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.
