Title: Exploring the Rising Popularity of Multi-Asset Funds for Investors
Subtitle: Is Now the Right Time for You to Consider Multi-Asset Allocation?
Are you missing out on the multi-asset investment revolution? According to data from the Association of Mutual Funds in India, multi-asset funds have been enjoying significant traction since the close of the previous calendar year. In December 2022, these schemes attracted the highest mutual fund inflows, amounting to Rs. 1,711.42 crore. The momentum continued into July, with multi-asset allocation funds recording over Rs. 1,300 crore of net inflows. Hybrid funds also witnessed a substantial inflow of Rs. 17,081 crores in August, with multi-asset and arbitrage funds attracting the majority of this investment.
Assessing multi-asset investing:
Multi-asset investing is a strategic portfolio approach that involves diversifying investments across various asset classes, rather than focusing on a single asset class. This approach aims to mitigate risk and enhance returns by taking advantage of the performance characteristics of different asset classes. Investors can participate in multi-asset investing through multi-asset allocation funds, which invest across multiple asset classes. These funds typically allocate a minimum of 10% of their corpus across three or more asset classes to achieve diversification within a single mutual fund scheme.
Why is it gaining favor?
Multi-asset funds offer a diversified portfolio encompassing various assets, such as equities, debt, and commodities. The different asset classes within the portfolio have low or negative correlations, meaning that when one asset class underperforms, the fund’s performance is supported by others. This diversification helps mitigate risk and generate better risk-adjusted returns across different market cycles. By investing in multi-asset funds, investors can benefit from the growth potential of stocks, the stability of fixed income, and the inflationary hedge and safe haven attributes of commodities like gold. Furthermore, these funds balance out the volatility of equities, making them an ideal solution for investors with a medium to low-risk appetite.
Additionally, multi-asset allocation mutual funds offer the convenience of automatic portfolio rebalancing. This feature is invaluable, especially in volatile market conditions. Regularly adjusting asset allocations is crucial for navigating market ups and downs, and multi-asset funds optimize this process without requiring active trading from investors. Unlike creating a personalized investment portfolio with professional assistance, which can be costly and inaccessible for many investors, multi-asset allocation funds provide a pre-structured, diversified portfolio.
With various options available, multi-asset funds can be tailored to different risk profiles, allowing investors to choose those that best suit their requirements. This unique combination of attributes within a single fund has made multi-asset allocation category schemes increasingly popular, particularly in the current highly volatile market scenario.
Should you invest?
While multi-asset funds offer numerous benefits, there are several factors to consider before deciding if these schemes are the right fit for your requirements. They are suitable for investors who want to participate in the growth of the equity market without fully exposing themselves to market volatility. Moreover, if you seek optimal diversification from a single investment and desire steady returns even when some asset classes are underperforming, multi-asset funds can be an excellent choice.
As equity markets surge toward record highs and fixed income options offer stable returns, now is an opportune time for investors to turn their attention to multi-asset mutual funds. These funds can help investors maximize the opportunities presented by each asset class.
Disclaimer: The article is authored by Vinay Rai, Director, Bliss Capital Services Private Limited. The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Business Insider India. It is advisable to conduct your own research (DYOR) before investing in any financial asset class.
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