Investors, take note! Check that your fund covers multiple assets.

Multi-asset mutual funds have become growing in popularity among investors recently and for good reason. Due to concerns about a potential recession, increasing inflation, high interest rates, and other factors, the current economic situation is a little hazy. Multi-asset funds are seen as a safe option for steady earnings in the present moment. Always make sure to check that your fund covers multiple assets.

Multi-asset mutual funds covers multiple assets

Multi-asset mutual funds diversify its holdings across many asset classes, such as equities, bonds, and commodities. These funds typically have to invest more than 10% of their total assets in each of these asset classes. They are not, however a true multi-asset fund as a result of this alone. For instance, if a fund invests 80% in stocks and just 10% in commodities and bonds, it may run into challenges if the stock market falls.

A genuine multi-asset mutual fund is one that follows a predetermined plan for investing across different asset types. This ensures suitable diversification and the asset balance should remain constant regardless of market conditions. For instance, the Nippon India Multi Asset Fund allocates fixed amounts to four asset classes: 50% to Indian equities for growth, 15% to stable debt, 15% to commodities with minimal connection to stocks, and 20% to overseas stocks with potential for global growth, ensuring it qualifies as a fund that covers multiple assets because of its fixed allocation of 50:20:15:15 (independent of market conditions).

Financial advisors recommend that investors diversify their portfolios across different asset types to protect their investments and aim for reasonable returns, especially during volatile times. When selecting a multi-asset fund, it’s important to choose one that stays true to its intended asset allocation.

The vast majority of other multi-asset funds invest in three asset classes: equities, bonds and commodities. They don’t necessarily conform to a preset asset allocation technique, such as those offered by Kotak, UTI, and Tata. Diversification is advised by financial advisors for investors.