Is multi-asset investing the right move?

59-Sapna-Ramesh-Biswas Sapna Ramesh Biswas

FOR INVESTORS IN INDIA, since the second half of 2022, the equity markets have been extremely volatile. Both of India’s benchmark indices have experienced unexpected volatility on February 1, triggered both by euphoria and dismay. On that day, the sensex both gained and lost 1.7 per cent, and the Nifty was no better. If these recent movements of the stock market have put you off investing, it is time for you to consider multi-asset investing.

What is multi-asset investing?

As the name suggests, multi-asset investing is a strategy that involves optimal diversification by allocating your corpus to a variety of assets. These include stocks, bonds and real estate and even gold and cash, depending on the market outlook and volatility. The idea behind multi-asset investments is to minimise your risk, by dividing your corpus across various asset categories, while also enabling you to gain maximum returns and participate in the growth of each asset category. For instance, if you were following a multi-asset strategy on the day of the Budget, then the loss you made in equities would have been offset by the gains you would have made in the bond market that day, where yields trended lower due to a strong buying sentiment.

Benefits of multi-asset investing: While you already know that multi-asset investing allows you to limit the downside, here are some more benefits of investing in it:

Optimal diversification: Since the multi-asset investing strategy prompts you to divide your corpus across major asset classes, your portfolio becomes diversified and, as you know, diversification is the first rule of investment. A diversified portfolio allows you to overcome the high levels of risk associated with asset classes like equity, while it also helps you earn better returns than more stable assets like debt.

Flexibility to meet targets: Often people, while considering an investment strategy, have a goal at the back of their minds, which could be purchasing a new vehicle or a new home or gaining the ability to enjoy an early retirement. Since multi-asset investing involves all major asset categories, your investment has the flexibility that is required to attain these goals. When the market is stable, you obtain high returns from equities and, when it is volatile, you can minimise your losses, taking refuge in safer options like debt and gold components.

Active management: Multi-asset funds allow you to fulfil your diversification objectives through a single avenue; they are actively managed by experienced fund managers who study the market and take portfolio decisions primed for optimal returns. The active management of such funds ensures that you never face unnecessary risk. Whenever the situation demands, the fund managers are prepared to shift your corpus from a risky asset to a safer one, and vice versa, thus offering you the full benefit of market fluctuations, while also protecting you from the negative side of it.

Should you opt for multi-asset investing?

Now that you know all about the multi-asset investing strategy and its various benefits, all that remains to be seen is whether this style is the right fit for you or not. As an investor, your decisions should be based on your personal profile, which includes your risk appetite, return requirements, investment horizon and financial goals.

Multi-asset investing is a great choice if your risk appetite isn’t extremely high and you find yourself dissuaded by the market’s volatility. Further, if you are not keen to maintain a diversified portfolio, or you dislike tracking the market and taking regular investment decisions, then a multi-asset fund will enable you to access professional fund management services while also enjoying the benefits of a well-diversified portfolio.

Among the various multi-asset funds available, ICICI Prudential Multi-Asset Fund emerges as one of the leading names in this category, thanks to its consistent performance across market cycles. The fund’s history over the past 20 years is notable for never having produced losses or negative returns over rolling five-year periods. Thanks to the covered call practice, the fund manager is able to deliver returns even in a range bound or sideways market.

So, in the current market environment, if you are faced with this confusion, then picking a multi-asset fund for investing could become your best financial decision of 2023.

Biswas is a mutual fund distributor.