We discuss why this is the right time to invest in Multi Asset Allocation Funds or Multi Asset Funds
They invest at least 10% of the money in 3 different asset classes each
This investment option is becoming relevant as many fear stock market correction from current highs
Multi Asset Fund ensures overall growth of your investments despite developments in any asset class
Investments in different asset classes help manage risks from individual asset classes such as equity, debt and gold
Multi Asset Allocation Fund helps you benefit from a portfolio with diversified investments across asset classes
For investors, along with choosing the right investments, the right mix of asset classes is also a challenge
Historically, equities haven’t done well every year
Gold was the best performing asset class in 2010 and 2011
Equities performed the best in 2013, 2014 and 2015
Debt came out on tops in 2016 while it was equities on top in 2017
Gold did the best in 2018, 2019 and 2020
Thus, it is difficult to benefit from consistent growth if you are investing in just one asset class
Since you need large sums of money for your future goals, you can’t afford a year with low or no growth
That’s why you need to smartly invest in a mix of assets
Since most investors are unlikely to have time and expertise for it, they can consider Multi Asset Allocation Funds
Investments in Multi Asset Allocation Funds helps you manage the risks from individual asset classes
Growth in other asset classes ensure compensation for adverse development in any asset class
For best long term results, you still need to invest the most in equities
We recommend equity-oriented asset allocation fund where 65% or more is invest in equities
In equities, risk is there from volatility and concentration in one category or theme
In debt, there is liquidity risk, repayment or credit risk and interest rate risk
It could be inadequate growth and tax inefficiency in gold
Studies have pointed out that more than 90% of long term returns are determined by the mix of assets
With Multi Asset Funds you don’t have to track different asset classes and investments in them
Expert fund managers do the job for you
Multi Asset Allocation Funds automatically create a portfolio for you that has investments in different assets
Asset allocation is being done for you
How much investments in which assets and when investments are to be made
Portfolio rebalancing is also being done by the fund manager
Multi Asset Funds are more cost-efficient and tax-efficient compared to investments in individual assets
You end up paying short term capital gains tax and long term capital gains tax for equities, debt and gold
There is the ease of regular investments through Systematic Investment Plan (SIP)
You can also invest lump sums through Systematic Transfer Plan (STP)
Multi Asset Allocation Funds are great for long term goals like retirement and children’s higher education
The investment needs to be made for 5 years or more
Regular payouts on reaching the goals can be organised with Systematic Withdrawal Plan (SWP)
This happens with the sale of units
Dividends are taxable and equity-oriented Multi Asset Allocation Funds are taxed like equities
Debt-oriented Multi Asset Allocation Funds are taxed like debt
Multi Asset Allocation Funds provides long term capital appreciation for major long term needs
Multi Asset Allocation Funds allow you to get the best of each asset class
Before investing, consider the risk from Risk-O-Meter, performance read Scheme Information Document (SID)
Restricting investments to debt and equity might make Balanced Advantage Funds a better option