Ever wondered why gold price increases when the Equity markets undergo correction or if there is news of economic recession? The last time this happened, many investors missed the bus to ride the Gold ETF upswing and vowed to take action the next time, but again missed it in the recent correction phase.
Is there a solution to this?
Yes, Multi-Asset Funds or MAF are the solutions to this problem. Simply speaking, these mutual funds shift money from one asset to a different asset like equity, global stocks, gold, debt, real estate and related instruments. They invest in at least 3 or more asset classes at a time, which gives you asset diversification automatically.
Why should you invest in a Multi-asset Fund?
Any retail investor who does not have time, knowledge or discipline to manage the asset allocation manually should ideally prefer investing in multi-asset mutual funds, which does the diversification across asset classes for him.
- Diversification: Mutual Fund houses have mathematical models which suggest the fund manager to enter or exit an asset when that particular asset is oversold or overbought. So, your money is managed through a rigorous process.
- Avoid Confusion: They say that 70% of the time markets are in range or do not follow a particular trend. These are the times when a retail investor makes mistakes. This makes MAF an ideal fund to invest in when there is confusion about where to invest
Difference between Multi-asset Fund and Balanced Advantage Fund
As you can see in the 2-year comparison chart between Nifty 50 and ICICI Prudential Multi-asset Fund, there is a huge outperformance of MAF when equity markets were down due to the presence of multiple assets like debt, gold etc.
As you can see in the 5-year comparison chart between Nifty 50 and ICICI Prudential Multi-asset Fund, there is outperformance of Nifty 50 in periods where equity markets were in a super bullish zone.
This implies that timing asset diversification is a difficult task for a retail investor and at least 5-10% of funds should be allocated ideally in a Multi-asset Fund.
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