Don’t put all your eggs in one basket, is the most common and the best advise given by experts to investors. That’s the basic philosophy of diversification. Different asset classes react differently to economic and market events. While the world grapples with uncertainty amidst the current Covid-19 situation, investors are dealing with their own dilemma….Which asset class is best suited for the current conditions? Those who try to time the markets may get disappointed. There is no way to predict the markets and in which way things will head. If you made predictions for various asset classes, the one thing that stands out is one can’t predict with certainty which way the markets will head. The other of course is that there is no consistent outperformer, or underperformer.
There have been years when equity markets had a dream run. Bonds have seen times when they were touted as the most dependable of assets. At times it’s Gold that has shined the brightest.
When equities are witnessing a correction, the presence of other asset classes in your portfolio would help you garner net positive returns.
Each asset has its own characteristic benefit.
|Gold||Gold diversification in the face of macro events; Store of value|
|Debt||Regular Income, Stability|
This is why a well-diversified portfolio with all these assets should be at the core of your investment philosophy.
Multi-Asset Funds – A comprehensive approach to diversification
A practical way to diversify your portfolio and re-balance regularly as per market movements is by investing in a multi asset fund.
A multi-asset fund can be beneficial as they provide the convenience of diversification across different asset classes of equity, debt and gold within a single product.
Here’s a quick roundup of some of the key benefits of investing in a Multi-Asset Fund
- You are invested in three major asset classes simultaneously.
- By Investing in three asset classes you ensure that your downside risk is protected.
- The Fund Manager makes disciplined investments across asset classes for you.
- They re-balance the allocation of assets within the fund as per markets
- No need to pay taxes each time your portfolio gets re-balanced.
- All the work is done for you. Diversification, and optimal and disciplined asset allocation, by an experienced fund management team.
Depending on a single asset in the current times may not be practical, it could dent your wealth goals, says Quantum Mutual Fund.