Mutual funds are one of the best investment instruments that can help you achieve your financial goals. Apart from providing you an opportunity to earn inflation-beating returns, they allow you to invest in various asset classes as per your investment objective and risk appetite. Different mutual funds invest in different asset classes, including equity, gold, debt, real estate, etc.
However, not all asset classes perform well during certain periods. For example, equities generally perform well during the growth periods, while debts usually perform well during periods of decreasing interest rates. Similarly, gold is considered a good investment option when the markets are too volatile and you don’t want to take that many risks.
This is the reason why it’s very crucial to invest in the right mix of asset classes. However, it might not be easy for you to time the economic cycle and change your asset allocation strategy accordingly. So, what you can do is invest in multi-asset funds.
What are multi-asset funds?
The Securities and Exchange Board of India (SEBI) has laid down certain guidelines for the classification of mutual funds. And as per the SEBI guidelines, a multi-asset fund is a mutual fund that invests in a combination of at least three asset classes. The minimum allocation of each of these assets should be at least 10%.
Typically, the objective of a multi-asset fund is to create a diversified investment portfolio for the investors. They can choose the distribution of asset classes and their composition as per their risk profile and investment horizon.
Are multi-asset funds good for investment?
Multi-asset funds can be a very good investment option for risk-averse investors who want to enjoy steady returns from their investment. Investing in multi-asset funds helps such investors to diversify their risk across investment classes and earn from each one of them during various phases of the economy. Let’s look at the advantages of investing in multi-asset funds:
As mentioned, multi-asset funds help you diversify your investment portfolio by investing in different asset classes. This eliminates the risks associated with investing in just one type of asset class. It also allows you to earn steady returns through various market cycles.
- Portfolio rebalancing
Rebalancing your portfolio from time to time is very crucial. Multi-asset funds come with an option of automatic portfolio rebalancing that can help you in many ways. When the markets become unpredictable and volatile, your fund manager automatically adjusts their asset allocation strategy to protect your investment from market fluctuations.
Multi-asset funds protect you from the hassles of monitoring the market movements daily. They provide you with ready-made diversified portfolios managed by professional fund managers. You can avail the benefits of different classes by investing in just one mutual fund.
You can invest in a multi-asset fund either as a lump sum or through a Systematic Investment Plan (SIP). This provides you greater flexibility to invest as per your investment objective. Also, you can enter or exit these funds without incurring any additional charges within a year.
Investing in multi-asset funds is a good idea to diversify your investment portfolio without actually investing in multiple mutual funds. This strategy can help you gain steady returns during volatile markets.
If you want to invest in mutual funds online, you can download Tata Capital Moneyfy App on your smartphone and start investing seamlessly.