Multi-asset Investing: An Important Aspect In Wealth Creation

Multi-asset investing is an investment strategy that involves investing in a diversified portfolio of different types of assets. These assets can include equities, bonds, commodities, and other alternative investments. The goal of multi-asset investing is to reduce risk and enhance returns by spreading investments across different asset classes that have low or negative correlations with each other.

Multi-asset investing takes into account the varying degrees of risk and return associated with different asset classes. By combining these assets in a portfolio, investors can potentially achieve better returns and reduce risk compared to investing in a single asset class. For example, in the current market scenario, when equity segment is under pressure, a portfolio that includes bonds, gold will do relatively well as bonds and gold has significantly gained in the meanwhile, thereby providing a more stable return.

Benefits of multi asset investing

There are several benefits of multi-asset investing, which includes

Diversification: Multi-asset investing helps investors to spread their investments across different asset classes, which helps to reduce risk and enhance returns. This diversification can help to protect against market volatility, as different asset classes tend to perform differently under different economic conditions.

Risk Management: By investing in a diversified portfolio of assets, multi-asset investors can mitigate risks associated with a single asset class. For example, if the stock market is volatile, investments in bonds, commodities can help offset any losses due to the gains in these asset classes.

Enhanced Returns: Multi-asset investing can potentially provide higher returns than investing in a single asset class. A well-diversified portfolio can take advantage of positive returns from different asset classes, even as other asset classes may be underperforming.

Flexibility: Multi-asset investing allows investors to adjust their portfolios as market conditions change, which provides the flexibility to respond to changes in the economic environment.

Professional Management: Many multi-asset investments are managed by professional fund managers who have expertise in analyzing different asset classes and constructing diversified portfolios. This can provide individual investors with access to the same level of expertise as institutional investors.

Investment Options for an Investor

Within the Indian mutual fund industry, there are a variety of hybrid funds through which an investor can take exposure to multiple asset class within a single fund. For example: By investing in balanced advantage category fund, an investor gets access to equity and debt asset classes. This allocation is dynamically managed such that an investor is protected from market extremes at all times. On the other hand, if you opt for a multi-asset category fund, an investor will get access to three or more asset classes within a single fund. Here, the fund has the flexibility to invest in equity, debt, commodities, REITs, InvITs etc. In this category fund too, the allocation to various asset classes is not static in nature. To make the most of the evolving market scenarios, the fund manager tweaks the allocation such the portfolio stands to benefit in the medium to long term. 

It is imperative to understand, given the nature of fund, such an offering should be a core part of one’s portfolio. If you are an investor who is unsure about how to allocate investments across different asset classes, then investing in a multi-asset type of offering can be an optimal solution This will ensure at no point in time, your investments are placed in a wrong asset class. Also, by investing in such a fund, an investor need not worry about rebalancing from time-to-time. This will be taken care by the fund manager who will be doing the needful whenever required. Hence, this offering is suitable for lump sum investing.

To conclude, multi-asset investing can provide investors with a more balanced and diversified investment strategy that can help to reduce risk and enhance returns over the long-term. Remember, the benefits of this strategy may not be instantly visible in a portfolio, but over the long term, this strategy can be a game changer in your wealth creation journey. So, be patient with your investments and always maintain a goal oriented approach to investing such that you do not stray away from the path of investing in a disciplined manner. 

Author: Sebastian M M , Certified Financial Planer