Multi Asset Funds: Should You Invest?

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Many investors are likely to come across or have come across a piece of advice when they begin their investment journey – to never put all their eggs in one basket. That’s a good reason why you must invest in multi-asset funds. The importance of diversifying your investments across different asset classes becomes apparent when you think about it.

It is logical that no single asset class can continue to perform well, and that different asset classes perform well at different times. Hence, multi-asset funds are a combination of different asset classes to create a portfolio for you to invest in. There are various asset classes like foreign equity, fixed income, domestic equity, currency, gold; and commodities like agriculture, real estate, energy, metals, art,and more.

Purpose of multi-asset funds

As you diversify your pool of investment among different asset classes, it reduces your risk. Asset classes behave differently during various economic cycles. If there is a negative outlook for the economy and all other asset classes are suffering, gold might do well.

It is important to diversify your investments to avoid relying on one asset class. Your debt investments may be performing well when your equity investments are not. Perhaps gold mutual funds could do well when both equity and debt are in a bad state of flux. It is possible that the US equity market is doing well when the Indian equity market is not.

Advantages of multi-asset funds

1. Expand your investment portfolio while managing risks

Multi-asset funds can offer investors greater flexibility by exposing them to a broader range of assets such as individual securities, sectors and strategies in addition to direct investment exposures. Meanwhile, you have an opportunity to grow while risks are managed.

2. Target specific and measurable outcomes

A multi-asset fund’s performance is not measured against a specific benchmark, as is the case with “traditional” balanced funds. Strategies focus on specific results, such as an inflation-beating return. Multi-asset funds could help you reach your investment goals as such multi-asset investing is designed to provide you with measurable investment outcomes.

3. Adapt to changing markets quickly

Actively managed multi-asset portfolios give you access to a large investment universe by exposing you to a variety of sectors, asset classes, countries, and market derivatives. This allows the portfolio manager to move funds in the direction of the desired investment outcome through risk management and return-seeking strategies.