Hybrid mutual funds are gaining popularity due to the innovative ways they handle your money. In the same fund, you can get exposure to multiple asset classes like equity, debt, derivatives, commodities, and so on. This falls perfectly with the old investment adage, ‘do not put all your eggs in the same basket’. Having various asset classes also redistributes your risks and makes your portfolio well-rounded to withstand unpredictable market storms. Multi-asset allocation fund is a type of hybrid fund that we shall know about more about in the upcoming sections.
As the name suggests, these types of funds have 3 or more underlying assets in predetermined weightages. Typically, a minimum of 10% is allocated each to equity (stocks and shares), debt instruments (bonds, treasury bills), and a third category that can be precious metals (gold, silver), real estate, or other commodities. This builds a diversified portfolio within the same fund scheme itself with the intention of building a high corpus in the mid to long-term investment window.
Two types of variations are possible for multi-asset allocation funds. One is time-bound. In this, investment is based largely on your preferred horizon of, say, 3 years, 5 years, 10 years, and so on. Asset allocation is done and monitored to provide you with the best possible returns by the end of the chosen period. This is a good goal-based investment strategy and keeps your risks under check as well.
The second is risk-based. A multi-asset allocation fund gives a higher degree of freedom for the fund manager to play around with the proportions of the different asset classes. If you have a high-risk tolerance, then a larger portion of your invested amount may be utilised towards equity exposure. If you have a lower to medium risk appetite, then debt instruments would be preferred. The cap is set at 80%. In other words, no particular asset class of the fund will have a capital exposure of more than 80% in it.
Apart from the aforementioned advantages, there are certainly other factors to keep in mind before investing in multi-asset allocation funds.
The standard profile of an investor who should invest in multi-asset allocation funds is someone who is not risk-averse but also not willing to absorb high risks. So, a moderate risk taker who is looking to gain reasonably steady returns over an investment period of at least 3 years, and ideally 4-5 years. It is not uncommon for investors to choose to stay invested in the fund after 3 years due to the better-than-average performance and returns provided.
The below highlights the top-performing funds in this category based on returns generated. However, this is just a list and in no way a recommendation.
Source: ET Money
If you’re one of those who want to get the best of both worlds, i.e. not taking too much risk and getting somewhat stable returns, then you can consider multi-asset funds as a choice. All you need to do is open the Fi app and look for the fund you wish to invest, and begin your investment journey in a few simple steps. However, It is advised that you do a thorough research and align your goals before taking the plunge.
There are several fund schemes for you to choose from. However, based on 3-year returns, performance stability, protection against volatility and overall steadiness, these are 3 of the best asset allocator funds out there currently.
Multi-asset funds are great for those who are not willing to take a high risk and are satisfied with steady returns. They come with automatic portfolio diversification and rebalancing, thus keeping your risks under check while aiming to make the most out of market movements. To get the best out of these funds, you must plan to stay invested for at least 3 years or so. For lesser investment periods, or higher risk-based returns, you may consider other investment tools.