Does Multi-Asset Investing Matter?

In an age when inflation is one of the biggest factors dwarfing your income and savings, there is no other way to remain financially robust but invest. While investing, one needs to be conscious of three facts—risk involved, inflation, and tax efficiency. These, cumulatively, can have a cascading impact on your hard-earned money. Thus, investment must be risk-adjusted, inflation-beating and tax-efficient. This helps you have a happy and successful investment experience. [EasyDNNnews:PaidContentStart]

It is often advised that one should not keep all their eggs in one basket because if the basket tumbles, all the eggs that one has are at risk. Similarly, in terms of investing, one should not invest all the savings in a single asset class. In case of an adverse development in that asset class, an investor stands to lose out on the investment made. In order to avoid such instances, it is necessary to diversify one’s investment across different asset classes.  

What is Multi-Asset Investing?

As the name suggests, multi-asset investing involves investing in more than one asset class. There are several asset classes like equity, debt, commodities, REITs, etc. that one can choose from. Since each asset class is distinct and unique with varying degrees of risks, returns and market cycles, following multi-asset investment ensures investors get the benefits of various asset classes coupled with optimal returns. As a result, not only is your investment suitably diversified but also your return is a function of more than one asset class. Over time, such an approach delivers better risk-adjusted and inflation-beating returns.  

In effect, multi-asset investment is more of a solution for investors who do not wish to take undue risks and like to spread their investments across various asset classes. A majority of investors tend to develop a strong affinity towards one asset class and are unable to invest across multiple asset classes either due to their own ignorance or lack of time to track various asset classes. 

It is here that a multi-asset mutual fund scheme, which follows a multi-asset strategy, comes to the investors’ rescue. Since these schemes are professionally managed by investment experts, who are backed by a strong research and analysis team, they are well-equipped to take advantage of the investment opportunities provided by various asset classes. This way, investors need not worry about asset allocation and assetspecific market cycles. On your behalf, the schemes’ fund managers will suitably keep your portfolio well-diversified in order to ensure risk mitigation. 

As a result, the investment experience tends to be stress-free and investors save time and energy from tracking the markets. Moreover, they are also saved from a bias-based investment approach, a trap most investors fall into. Historically, it is seen that investors who invested following a multi-asset approach have emerged wealthier over a complete market cycle.  

Multi-Asset Category Funds

The category of multi-asset funds is essentially hybrid mutual funds with a mandate to invest in three or more asset classes. They have a minimum exposure of 10 per cent each in three or more asset classes. Ideally, a multi-asset fund takes exposure in three dominant asset categories—equity, debt and gold. However, many funds also take exposure to real estate through REITs (real estate investment trusts) and InvITs (infrastructure investment trusts). 

Further, this category of fund has the ability and flexibility to suitably alter exposure to asset classes as per the ongoing economic situation and market valuation dynamics. It needs to be highlighted that change is the only constant and this is true for the markets. Given the fact that each asset class has a unique risk-reward ratio, a multi-asset fund offers the best possible investment solution when it comes to capturing the benefits of different asset classes.  

Thus, by investing in a multi-asset fund, an investor does not face the risk of asset concentration while the portfolio is not prone to asset-specific market risk even as the wealth creation journey continues unabated. To conclude, multi-asset schemes are like evergreen funds which should be a part of any investor’s portfolio as a one-stop solution for asset allocation purposes. 

The writer is Founder & CEO, Fundkarts (India) Pvt. Ltd.
■ Email : [email protected] ■ Website : www.Fundkarts.Com 
 

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