Why the importance of a multi-asset portfolio cannot be overstated? MintGenie explains

livemint.com:

‘Don’t put all your eggs in one basket’, once said a wise man.In the dynamic landscape of financial markets, constructing a robust investment portfolio is crucial for achieving long-term financial goals. One strategy that is gaining prominence is the adoption of a multi-asset portfolio. This approach involves diversifying investments across various asset classes, offering a range of benefits that contribute to reduced volatility, enhanced risk-adjusted returns, downside protection during turbulent times, and access to different market opportunities.

There is a diverse set of investment opportunities across asset classes. Beyond traditional equities and bonds, investors can explore alternative investments like real estate, commodities, and structured products. A multi-asset portfolio facilitates access to these different asset classes, enabling investors like Fund of Funds to capitalise on emerging trends or capitalise on opportunities that may not be readily available in a single-asset strategy.

We shall cover each of the benefits mentioned above in detail. But first, let us take a look at the source from which the inspiration of this write-up originated. Take a careful look at the table below.

This data is over the last 2 years (31st Dec ‘21 to 31st Jan ‘24). We compare a multi-asset portfolio consisting of equity component (Nifty 100 ETF), commodity component (Gold ETF), and debt component (Bharat Bond ETF) in equal weightage against each of these individual asset classes. One of the primary advantages of a multi-asset portfolio is the potential to reduce overall portfolio volatility.