Multi asset mutual funds have again become a favorite of investors in recent times. This is not without reason either. Actually the current economic environment is not looking good. Inflation is increasing, interest rates are high and there is a fear of recession. At such times, multi asset funds are considered a safe bet for stable returns. Let us first of all know what are multi asset mutual funds…
These can be called true multi asset funds
Multi asset mutual funds are those which Invest your capital in many asset classes like equity, debt and commodity. According to the rules, the fund manager will have to invest at least 10 percent of his fund in all these asset classes. But the question arises, does this really make it a true multi asset fund? For example, when the stock market is in a downtrend, investing 80 per cent in equity and only 10 per cent in debt and commodities will adversely impact the fund’s performance. A true multi-asset mutual fund is one that invests in all assets and the investment methodology is predetermined.
Such allocation is necessary
Experts in the mutual fund industry say. It is important to note that having a predetermined method of asset allocation ensures proper diversification and hence the ratio of asset classes should not change as per market conditions. Take the example of Nippon India Multi Asset Fund. It is a multi-asset fund that invests in four asset classes in a fixed proportion. It invests 50 per cent in Indian equities (growth), 15 per cent in debt (relative stability), 15 per cent in commodities (low correlation with equities) and the remaining 20 per cent in foreign equities (global growth prospects). p>
Comparative example of returns
This allocation formula of 50:20:15:15 (regardless of market conditions) makes it a true multi asset fund. Almost all other multi asset funds like Kotak, UTI and Tata invest their corpus across all three asset classes, equity, debt and commodity. In the last one year, multi asset funds of SBI, Tata and HDFC have given returns of 18.53 per cent, 18.18 per cent and 16.23 per cent, respectively, while Nippon India Multi Asset Fund has given returns of 18.54 per cent.
Thus. Experts advise
Expert financial planners advise investors that their portfolio needs to be diversified across asset classes, so that even in times of ups and downs, not only are their investments safe, but they also get Get good returns also. Also, while choosing a multi asset fund, they should invest in a fund that truly follows the fundamentals of a multi asset fund.
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