It is always important in any market globally especially the financial market to bear in mind that when risk is high, return is equally high and when risk is low, return is also low. Multi-asset funds are a good solution to achieve this because they involve the investment in a diversified manner across various asset classes. In a recent interview Shaily Gang, Head of Products at Tata Asset Management said that this strategy which she has been following for since long was all the more important in today’s world where equity markets are at their historical high.
Why multi-asset funds help lessen the dependence on equity in the course of heightened market volatility
There are numerous complications investors are likely to experience when responding to the existence of negative conditions. One weakness of the technique is that many people quit an entire asset class, often when a particular market is shrinking, like withdrawing from equity investments during a stock market slump or debt during a good run for stock. These are choices made based on short-term threats, not the long-term prospects thus inefficiency in capital utilization.
This is tackled by the multi-asset funds in a way that the investments are diversified across the different classes thus preventing the investors from being locked out of sudden windfalls. For example, if equity is on the rise for some time investors with diversified portfolios that include equity will benefit. This strategy also reduces the possibility of being out of growth in other classes of assets at some other time such as gold or bonds.
The long-term success of an investment largely depends on the risk factor and the amount of reward that is to be expected. It is one of the reasons why multi-asset funds that are characterized by a combination of equities, bonds, gold, and, sometimes, commodities are ideal for a core portfolio in long-term investing.
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A Penny for Your Thoughts and a Toon for Your Stash: The Role of Multi-Asset Funds in Inflationary Environments.
It is clear therefore that inflation has an important bearing on investment yields. Inflation means the fact that the purchasing power of money remains unchanged and in this circumstance, conventional investments such as shares, bonds, and cash are likely to provide high returns. However, that situation changes when expected inflation rises sharply from, or dips well below, the market’s expectations. In such circumstances, some portfolios – such as commodities – have a way of performing better.
Multi-asset funds are well positioned to play countervail to the potential of inflation given that inflation is always unpredictable. Other risks are unfortunately a little more unpredictable, but by placing their money across different types of assets such as commodities that tend to do well when there is inflation, the funds in question provide a sound method of guarding against inflation shocks. There is no single investment view that is superior in every kind of inflationary environment and, therefore, diversification is imperative.
Why Should The Monetary Distribution Be The All-Pervading Formula For Investment?
Individual investors or clients may try and control their portfolios by selecting several products, for example, equity midcap and small-cap funds, Nifty 50, ETFs, bonds, or Gold ETFs. Nonetheless, the main benefits arise from an investment in a multi-asset fund, with a professional fund manager, as outlined below.
- Expertise in Asset Selection: Professional managers are capable of making a selection of the right type or style of investment within the respective asset class for maximum return.
- Tactical Allocation Adjustments: Fund managers can also make small to medium adjustments or a strategic shift of some of their investments when the need arises to improve on the portfolio results.
- Tax Efficiency: Maintenance of positions within a multi-asset investment also called rebalancing or portfolio adjustments does not call for a taxation of the investor. The fund is only subject to taxation when the units of the fund are to be redeemed.
- Convenience and Accessibility: Equally, for High net Net-Worth Individuals (HNIs) and retail investors, direct access to such complex strategies as commodity arbitrage can at times prove cumbersome. Multi-asset funds help to make this process easier as they give direct exposure to several asset classes.
Conclusion
While managing multi-asset funds can be a complex task, the major advantage of using such a portfolio is the belief that it offers a strategic edge to the portfolio manager.
Multi-asset funds offer clients a full investment basket that is diversified, expresses reasonable risks and returns reasonable rewards, protects against inflation shocks, and is tax-wise. When investing these funds into your core strategy, you can easily mitigate a skewed portfolio which may prove very vulnerable in diverse market conditions. Multi-asset funds are therefore a perfect solution for those who seek strategies to improve their investment portfolio.
