The Many Benefits of Multi-Asset Funds

Good investment experience while achieving various financial goals is what investors should look for. There are multiple assets available for investments, each with its own distinct quality, valuation dynamics, risk parameters and performance cycle. The prudent way to create long-term wealth is by having proportionate exposure to various asset classes, be it equity, debt, commodities or real estate. It is needless to say that asset allocation is a well-proven and successful investment strategy. One may look at investment vehicles which diversify your portfolio in various asset classes.

Not only such an investment approach saves you from the asset concentration risks but helps you get an optimum mix of long-term returns from multiple assets. It is here that multiasset mutual funds establish their effective relevance and emerge as an evergreen investment strategy. These funds invest in three or more assets with a minimum exposure of 10 per cent to each. They take care of the asset allocation and work on the simple principle of mitigating asset concentration risks.

Essentially, these funds find a strong analogy with the old saying that one should not put all eggs in one basket. Any damage to the basket does impact all the eggs and therefore it is advisable not to concentrate all the investments at one place. Multi-asset funds ensure risk-mitigated and risk-adjusted wealth creation from different assets. It is often observed that investors tend to develop undue high affinity towards one asset class. Since every asset class has a market cycle, during the downtrend there is visible value erosion in the portfolio which unnerves investors. 

Moreover, a majority of the investors are unable to suitably allocate their investments, either because of lack of knowledge or time. Multi-asset funds come as an instant rescue for them as the inbuilt investment process ensures portfolios are well spread across the asset classes. On the one hand, this strategy helps your investments remain goal-focused and you save a lot of your time and energy while keeping investment-related stress at bay. On the other hand, multi-asset investment effectively takes care of investors' irrational financial behaviour which keeps popping up during the course of investments.

Thus, such categories of funds are like solution-based investment products which keep you stress-free despite volatility in the markets. For instance, there are times when equity markets show weak trends while debt and gold are in upswings or vice-versa. During such times, multi-asset funds help investors achieve a stable performance by optimising returns through offsetting losses from one asset class by gains in other assets. As a result, investors get the best optimum returns in the long term irrespective of the market cycles an asset class is in.

Reasons for Investing in Multi-Asset Funds

There are certain benefits in a multi-asset investing approach through multi-asset mutual fund schemes. Investors may consider the following advantages which make such schemes a ‘must have’ in their portfolios.
1. Optimal Diversification - Diversification is one of the basic keys for successful investment. The multi-asset funds spread your corpus across asset classes, and thus the portfolio is well-diversified. Having a diversified portfolio enables you to overcome the high-risk factor of asset classes like equity, while also helping you earn better returns than comparatively stable assets like debt.
2. Flexibility to meet Targets - Since multi-asset funds involve all major asset categories, your investment has the flexibility that is required to attain your goals. This is because, in a stable scenario, the strategy can help you obtain high returns from equities and, in a volatile phase, you can minimise your losses due to the safety offered by the debt and gold components.
3. Active Management - The active management of such funds ensures that you do not face unnecessary risks or stress of managing investments. Whenever the situation demands, the experienced fund managers are prepared to shift your corpus from a risky asset to a safer one, and vice versa, thus offering you the full benefit of market fluctuations with optimum returns.

To conclude, the combination of several benefits of a multiasset fund offers a good long-term and fulfilling investment experience for investors. Historical investment trends suggest that those who exercised a multi-investing approach through asset allocation emerged wealthier while effectively riding various market cycles. Investors may consider multi-asset funds in their portfolio as effective solutions for achieving their long-term financial goals.

The writer is Mutual Fund Distributor. ■ Email : parekhdm@gmail.com