Is it time to rethink your strategy with multi-asset funds?

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Also Read: Small caps cause inflows into equity mutual funds to spike 23% in February: AMFI data Multi-asset allocation funds have been pitched as a less volatile option compared to their aggressive hybrid equity counterparts, offering indexation benefits if the equity allocation lies between 35 to 65%. This proposition, coupled with the recent tax changes, makes these funds an attractive choice for those seeking diversified, tax-efficient investment avenues. Last year we witnessed the launch of nine multi-asset allocation funds by different fund houses.

This influx can be seen as a testament to the growing investor interest and the fund houses' efforts to fill portfolio gaps or cater to high demand. It's essential to recognize that these funds come in various flavours, each with its unique blend of investments. Some might lean heavily towards international markets or include commodities, adding a layer of diversity to your portfolio.

This variety means that as an investor, a thorough examination of each fund's composition is necessary. Introducing new funds that may seem attractive at first glance. However, diving into these waters requires a clear understanding of what each fund entails and the risks associated with them.

This is especially crucial for those just starting their investment, where the allure of novelty should be balanced with caution and due diligence. For individual investors, particularly those exploring investments without the guidance of a financial advisor, the wisdom lies in moderation. Committing to a single multi-asset fund and keeping it to a reasonable proportion of your overall portfolio—ideally between 15 and 20%—can offer a balanced approach to risk and reward.