Understanding multi-asset investing

‘DON’T KEEP ALL EGGS in one basket’ is a popular adage in the investment world. Simply put, concentrating your investments in a single asset class ties your fortune to the vagaries of that asset class. Investors increasingly realise that having a well-balanced and structured portfolio is key to long-term returns and peace of mind. This is why multi-asset investing as a single-window and all-weather solution has gained prominence.

Story of multiples 

Due to the dynamic nature of global markets and economic cycles, it is impossible to consistently invest in the winning asset class. Also, each asset class may have prolonged cycles of outperformance and underperformance. Historical data also demonstrates that no single asset class performs consistently well. An investor who invests 100% of their hard-earned money in a single asset class leaves their investment vulnerable to the asset’s ups and downs. During good times, this may pay off, but during bad times, such a strategy may not suit the investors’ risk appetite. This can cause a suboptimal return experience.

Multi-asset investing, which is best routed through a multi-asset mutual fund in India, can provide diversified exposure to various asset classes through a single fund. The mandate of such a fund is to invest in three or more asset classes. Typical asset classes where multi-asset allocation funds invest are equity, equity arbitrage, debt/fixed income, gold, silver, international equities, REITs, and InvITs. As a result, investors who wish to lower portfolio volatility and aim for greater predictability of returns should consider a multi-asset offering as a core part of their portfolio.