Multi-asset allocation funds: A Comprehensive Guide

As per SEBI categorization of Mutual Fund schemes, multi-asset allocation funds need to invest in at least 3 asset classes with a minimum allocation of at least 10% in each asset class. These asset classes may invest in equity, debt and commodities like gold, silver etc.
Benefits of Multi-asset allocation funds
There are several benefits by investing in Multi-asset allocation funds. Few are as follows:
- Diversification: Multi-asset allocation funds offer diversification across various asset classes, simplifying the investment process.
- Risk Mitigation: Investing in a mix of asset classes, such as equities, bonds, and sometimes commodities, may contribute to reduced overall portfolio risk.
- Flexibility : Fund managers may adjust the allocation among different asset classes based on market condition, economic outlook etc. This flexibility allows fund managers to manage the risk in the scheme dynamically.
Risks of Multi-asset allocation funds
There are also some risks associated with investing in Multi-asset allocation funds, including:
- Market Risk: The value of investments can be influenced by broader market movements, including changes in equity and commodity prices.
- Interest Rate Risk: Shifts in interest rates can negatively or positively impact the value of the debt securities held within the fund.
- Asset Allocation Risk: The fund's performance depends on the manager's ability to allocate assets effectively in the defined asset allocation.
- Liquidity Risk: Some assets, particularly those less frequently traded may be challenging to convert to cash quickly.
Who Should Invest in Multi-asset allocation funds?
Multi-asset allocation funds may be a good option for investors who are looking for a diversified investment.
How to Choose a Multi-Asset Fund
When choosing a multi-asset fund, you may consider the following:
- Investment Objective and/ or Fund Manger’s or Fund House Track Record
- Risk Tolerance
- Time Horizon
- Fees and Taxation
Conclusion
Multi-asset allocation funds may be a good investment option for investors who are looking for a diversified investment. However, it is important to understand the risks associated with investing in Multi-asset allocation funds before you invest.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Published on March 21, 2025