- Overseas stocks
- Real estate etc.
- You invest in the stock market and it falls immediately!
- You invest in gilt funds and the bond prices crash!
- You invest in gold and gold hit 52-week lows!
- Overseas stocks etc.
What are Multi Asset Allocation Funds?As per SEBI, ‘multi asset allocation funds must invest in at least three asset classes with a minimum of 10% each in equity, debt and gold’. The idea is to generate stable and superior returns using negative correlation of asset classes. Negative correlation is when one asset class falls while the other rises. Equity, Debt and Gold have negative correlation.
- Equities outperform debt and gold in a growing economy.
- When stock markets are falling, investors shift to debt and gold for stable returns.
Who Should Invest in Multi asset allocation funds?This fund is perfect for investors who are looking for a one-stop solution. So, instead of investing in three schemes, investors can get the same benefit by investing in just 1 scheme. This is perfect for investors who do not have the time or knowledge to rebalance their portfolios as per market conditions. But are these funds worth the hype?
Should You Invest in Multi asset allocation funds?This fund might look great on paper. But before investing in them, you need to know the following: 1. No Long Term Track Record: Multi asset allocation funds were launched in 2018-19. Before that, majority of these funds were monthly income plans or hybrid funds. For example:
- SBI Multi Asset Allocation fund was SBI Monthly Income Plan.
- HDFC Multi asset fund was HDFC Multiple Yield Fund – Plan 2005.
- HDFC Multi asset fund holds 64.7% in cash, 10.8% in debt, 11.5% in equity and 13% in commodities.
- ICICI Prudential Multi asset allocation fund invests 87.8% in equities.
Final Thoughts:Multi asset allocation funds might work for investors who do not have the time or knowledge to create a diversified portfolio. But for investors who do, it is much better to invest in individual asset classes. You will be able to generate substantially higher returns. Suppose you want to invest Rs 1 Lakhs. You have two options –
- Invest in multi asset allocation fund (SBI Multi Asset Allocation Fund)
- Invest in individual asset-oriented funds.
|Fund||SBI Multi asset Allocation Fund|
|NAV on 1st Jan 2019||26.02|
|NAV as on 1st Jan 2021||32.99|
|Current Value of Investment||1,26,767|
|Fund||SBI Bluechip Fund||SBI Gold Fund||SBI Short Term Debt Fund|
|NAV on 1st Jan 2019||37.31||9.96||20.87|
|NAV as on 1st Jan 2021||48.57||15.56||25.11|
|Current Value of Investment||59,095||18,742||51,254|