What is a Multi-Asset Allocation Fund?
A multi-asset fund is a type of mutual fund scheme that invests in various asset classes such as debt, equities, fixed income strategies, real estate, index-tracking funds, financial derivatives and commodity funds such as gold. According to SEBI (Securities and Exchange Board of India) multi-asset allocation funds can offer a level of diversification. The diversification offered by this mutual fund scheme can allow plan managers to balance risk with reward and aim for similar returns over a long period of time.
If you are a retail investor, here are some reasons why you might consider a multi-asset allocation fund:
relatively low volatility
As you may already know that the performance of mutual fund schemes is linked to the performance of the markets. This is why you must have often heard that investors need to assess their risk appetite and time frame before investing in mutual funds. For example, if you invest in an equity mutual fund, there are chances that it may carry higher risk if the market shows any signs of a downtrend. However, this is not the case with multi-asset mutual fund schemes as they invest in all asset classes. Since each asset class performs differently during the market cycle, the potential loss or gain can be balanced as well.
Diversity
Multi-asset allocation schemes, depending on the name, can invest in multiple asset classes. Therefore, through one investment, you can invest in more than one asset class. This inadvertently allows you to diversify your financial portfolio. This diversification can be considered as an opportunity towards creation of a perpetual wealth fund, base goals. It is wise to go through all the details in the Scheme Information Document (SID) before making an investment to make an informed decision.
Potential for sustained returns over the long term
Since multi-asset allocation funds invest in different asset classes, some asset classes may outperform others over time. This can allow you to protect your capital in a scenario where one asset class may underperform. Ultimately it can also allow you to take advantage of market volatility to achieve balanced, consistent returns over the long term. This investment strategy can be useful if you are looking to achieve your long-term goals.
In addition to the above, the following can help you consider whether you should invest in a multi-asset allocation fund:
- Investing in a multi-asset allocation fund may have the potential to be more tax efficient than investing in a single asset class.
- While risk can be diversified, it is not possible to aim for high returns over a short investment horizon.
- If you want to build a corpus over the long term, you can consider investing in multiple asset allocation funds as they can perform positively across multiple market cycles.
- Also, these mutual fund schemes can allow you to take advantage of bull market cycles
It may help investors to note that due to this diversification, these schemes may not be able to deliver similar results with others that invest in single asset classes.
Before investing, it is important that you consider your risk appetite, time frame and goals to make smart investment decisions.
Disclaimer
An investor education initiative.
meeting www.icicipruamc.com/note To know more about the process of fulfilling the Know Your Customer (KYC) requirement for investing in mutual funds. Investors should deal only with registered mutual funds, details of which can be verified on SEBI website http://www.sebi.gov.in/intermediaries.html, For any queries, grievances and grievance redressal, investors may contact the AMC and/or Investor Relations Officers. In addition, investors can also file complaints on https://scores.gov.in If they are dissatisfied with the proposals made by the AMC. The SCORES portal allows you to register your complaint with SEBI online and view its status later.
Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.