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Why investing in a multi-asset allocation fund makes sense in a volatile market


The recent couple of years have witnessed magnified volatility with regards to the financial markets in India. Apart from the pandemic, Russia’s invasion of Ukraine, steep rise in crude oil prices, weakening of the Indian rupee and the second wave of Covid-19 could be seen as a few contributors to this market upheaval. Many financial experts are of the opinion that this intense market volatility, especially in the equity markets may continue for a considerable time period. With such times of uncertainty looming over the horizon, it may seem prudent for investors to spread their investments across multiple asset classes. This is where it might make sense to opt for a multi-asset investment owing to the market volatility.

Investors can pay heed to the immortal words of Benjamin Grantham, which were –
‘There is a close logical connection between the concept of a safety margin and the principle of diversification.’ This statement may find its modern-day interpretation in asset allocation done through multi-asset allocation schemes. Choosing this type of scheme could help investors get the required exposure to multiple asset classes such as equity, debt, gold and so on. So, in case one of the asset classes faces a downward trend, there are other asset classes that might help an investor with capital protection and more or less stable returns over time.

In addition to the balancing act of these mutual fund schemes, here are two other reasons why multi-asset investment through multi-asset mutual fund schemes make sense in a volatile market –

Fund management expertise

Market volatility may lead to panic selling/buying due to worrisome sentiments that spread fast across the markets. In such a time, when there are high chances that a notional loss may turn into an actual loss, most investors may not be equipped with the information to either enter or exit the markets. A multi-asset allocation fund might offer investors with the expertise of fund managers and their team. These professionals might be able to research and pick appropriate securities to rebalance an individual’s portfolio in line with their risk appetite and goals.

Exposure to varied asset classes

Choosing multi-asset allocation funds can allow investors to invest across asset classes including equity, debt, gold etc. This exposure may be relevant to the financial goals of those investors who wish to continue investing for the long term. As a thumb rule, multi-asset mutual fund schemes are required by the SEBI (Securities and Exchange Board of India) to invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes. This variety can help investors in diversifying their portfolio when they choose a multi-asset allocation investment.

It is important for investors to assess their financial goals, risk appetite and investment horizon before making investment decisions.

Disclaimer

An investor education initiative.

Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website http://www.sebi.gov.in/intermediaries.html. For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.



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