Risk Adjusted Returns
Single asset class schemes might struggle to maintain stability particularly in times of crisis. Whereas, Multi Asset Allocation schemes diversify across multiple asset classes. By doing so, it aims to deliver good returns while managing the risk of losses even amidst market volatility.
Diversified portfolio
If you want to escape the trouble of investing in each asset class separately, you can simply choose these multi asset allocation schemes. All you have to do is pick one multi asset allocation scheme and you get a diversified portfolio that invests across asset classes.
Should You Go For Multi-Asset Allocation Funds?
Should You Go For Multi-Asset Allocation Funds?
Multi-Asset Funds are a type of mutual fund scheme that can be considered by novice retail investors. As an investor if you are looking for investment avenues for long term wealth creation, then it may be prudent to add multi-asset allocation mutual fund schemes to your portfolio.
What is a Multi-Asset Allocation Fund?
A multi-asset fund is a type of mutual fund scheme that invests across various asset classes such as debt, equity, fixed income strategies, real estate, index-tracking funds, financial derivatives and commodity funds like gold. According to SEBI (Securities and Exchange Board of India) multi-asset allocation funds can offer a level of diversification. The diversity offered by this mutual fund scheme might allow scheme managers to balance risk with reward and aim for commensurate returns over the long term.
If you are a retail investor, here are a few reasons why you could consider multi-asset allocation funds:
Comparatively less volatility
As you may already be aware, the performance of mutual fund schemes is tied to the performance of the markets. This is why you might often hear, that investors need to assess their risk appetite and time horizon before investing in mutual funds. For instance, if you invest in an equity mutual fund, chances are that it might carry a higher risk if the market shows any signs of a downward trend. However, this is not the case with multi-asset mutual fund schemes as they invest across asset classes. As each asset class performs differently during a market cycle, the potential loss or gain might also be balanced.
Diversification
Multi-asset allocation schemes, by virtue of the name, can invest in multiple asset classes. Therefore, through a single investment, you can invest in more than one type asset class. This inadvertently allows you to diversify your financial portfolio. This diversification can be considered as an opportunity towards building a sustained wealth corpus basis goals. It is prudent to make an informed decision by going through all the details in the Scheme Information Document (SID) before you choose to invest.
Potential for sustained returns over long term
As multi-asset allocation funds invest in varied asset classes, it might be likely that some of the asset classes outperform the others over time. This could allow you to protect your capital in a scenario where one asset class might underperform. Ultimately it may also allow you to get balanced, commensurate returns over the long-term by taking advantage of market volatility. This investment strategy may be useful if you are looking towards achieving your long-term goals.
In addition to the above, the following can help you consider if you should invest in multi-asset allocation funds:
Investments in multi-asset allocation funds may have the potential to be more tax efficient than investments in a singular asset class.
While the risk may be diversified, it may not be possible to aim for higher returns over a short investment horizon.
If you are looking to build a corpus over the long-term you could consider investing in multi-asset allocation funds as they might perform positively over multiple market cycles.
At the same time, these mutual fund schemes may allow you to take advantage of the bull market cycles It may help investors to note that due to this diversification, these schemes may not be able to deliver on par results with others that invest in single asset classes. Before investing, it is important that you take a close look at your risk appetite, time horizon and goals in order to make smart investment decisions.
Disclaimer
An investor education initiative.
Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website http://www.sebi.gov.in/intermediaries.html For any queries, complaints & grievance redressal, investors may reach out to the AMCs and/or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
5 Tips to Diversify your portfolio your mutual fund portfolio with Multi-Asset Allocation Funds
5 Tips to Diversify your portfolio
You may have heard of the age-old proverb, ‘variety is the spice of life’. But, did you know that variety as a concept is also important when it comes to personal finance and investment decisions. It finds its implication in the term ‘diversification’, which many financial experts and fund managers have quoted to be an imperative requirement in a prudent mutual fund portfolio. Oftentimes, you may find it difficult to single-handedly achieve diversification as it involves a lot of time, research, studying of the markets, closely monitoring stocks through various trends and so on. And sometimes, you may not have the adequate financial acumen or time to understand how different asset classes function in order to make sound investment decisions. This is where multi-asset allocation funds could prove beneficial. Multi-asset allocation funds might offer you the opportunity to traverse through market volatility while experiencing capital protection and commensurate returns. Here are five tips that might help you diversify your mutual fund portfolio with the help of multi-asset allocation funds: .
1. Choose this type of scheme to add diversification to your portfolio :
Multi-asset funds primarily invest in a minimum of three asset classes. Some of the asset classes include; equity, debt, gold, real estate, securities with fixed income strategies, and so on. Therefore, investing in multi-asset allocation schemes helps to increase the diversification of your investment portfolio. Each of these asset classes has different investment objectives and might function differently across macroeconomic and microeconomic scenarios. This could offer your portfolio an advantage, as when one asset class is facing a downside, the other asset classes could function as capital protection. This way, by choosing to invest in one scheme, your mutual fund portfolio can avail the benefits across asset classes.
2. Avail the expertise of a financial advisor :
You wish to make prudent financial decisions when it comes to investments. However, what if you do not have the time or the resources to do so? In such a case, adding a multi asset allocation mutual fund to your portfolio may help as it comes with the expertise of a fund manager who is backed up by a research team. These finance experts may help in smartly allocating the investment in various asset classes in line with the economic situation. This tip comes in handy when novice investors wish to look for a mutual fund scheme that acts more like an all-weather fund and helps to diversify their financial portfolio.
3. Opt for this fund to invest in a structured manner :
SEBI or Securities and Exchange Board of India has directed all multi-asset allocation funds to invest in minimum three primary asset classes. The most common asset classes are equity, debt and gold. Additionally, a multi-asset allocation fund is directed to invest a minimum of 10% each proportionally in each of the asset classes. This provides an assurance that no matter what the market scenario is, each type of asset class is represented in your portfolio. This in a way, highlights the disciplined structure that investing in multi-asset funds can offer to your portfolio. It may further help investors to closely look at the scheme information documents to understand the mandate and investment objectives.
4. Build your portfolio with the aim of long-term wealth creation :
Multi-asset allocation schemes might be suitable for investors who have long-term goals and can stay invested for the time period of 5 years or more. The equity class component of the scheme may help investors avail the benefits of upward trends in the market, while the debt class component may help in hedging at times of downward trends in the market. The commodity asset class serves as a buffer as it could prove to be relatively stable across market cycles. Therefore, it may seem like a smart investment decision to maximise your portfolio by adding multi-asset allocation schemes to it.
5. Strategic asset allocation to build a good portfolio :
Sometimes, investors might feel that directly choosing to invest in a hybrid mutual fund scheme can serve the purpose of asset allocation. However, it is prudent for investors to first understand their investment goals, their risk appetite and time horizon before choosing the scheme that can fit your needs. While a multi- asset allocation fund can be an addition towards asset allocation towards your portfolio, it is equally important note that these schemes alone may not be considered a well-diversified portfolio and addition of other schemes might make the portfolio robust. Smart investors such as you may benefit from monitoring your mutual fund portfolio at timely intervals to ensure sound financial decisions.
Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website https://www.sebi.gov.in/intermediaries.html For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
