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Business News/ Mutual Funds / 6 best multi-asset allocation funds to invest in 2024; check list here
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6 best multi-asset allocation funds to invest in 2024; check list here

Multi-asset allocation mutual funds are a suitable choice for risk-averse investors seeking a blend of stability and moderate return potential.

Choosing the best multi-asset funds for investment based on returns.Premium
Choosing the best multi-asset funds for investment based on returns.

India boasts over 15 multi-asset mutual fund schemes, each mandated to allocate a minimum of 10% to at least three distinct asset classes. Typically, these funds comprise a blend of equity, debt, and other asset classes such as gold, real estate, and so on. Here are some essential aspects of these funds:

Diversified asset mix: These funds typically blend stocks (equities), bonds (debt), and an additional asset class, such as real estate investment trusts (REITs), gold, or commodities.

Diversification: The purpose of diversifying is to distribute risk across various asset classes, to potentially provide stability and smoother returns, in contrast to concentrating on a single asset class.

Allocation by fund manager: The fund manager dynamically oversees the distribution across these asset classes, making adjustments in line with their market outlook.

Risk-return profile: Depending on the asset allocation strategy implemented by the fund manager, these funds can accommodate a broader spectrum of investor risk appetites.

Also Read: 5 best flexi cap mutual funds gave over 20% annualised returns in the past 5 years 

The benefits of including such a fund in your investment portfolio are:

  • Reduced risk compared to many hybrid funds, given that investments are diversified across multiple asset classes.
  • Reduced allocation to stocks implies that returns may lag during bullish market conditions.
  • Appropriate for an investment timeframe of a minimum of three years.

Which funds you must invest in?

The selection of funds is contingent on your perception of long-term returns and financial goals. Your assessment of the risk-return dynamics within your portfolio is also crucial. While some investors base their fund selection on the stability reflected in the previous five or ten-year returns, other factors come into play, such as the portfolio turnover ratio, fund manager performance, performance relative to the category, track record of the asset management company (AMC), assets under management (AUM) of the scheme, expense ratio, and various other considerations.

As numerous investors either avoid delving into the intricacies of mutual fund performance or struggle to interpret the jargon used in personal finance, they often confine their evaluation to the fund’s performance over the past five years or thereabouts.

Name of the mutual fund

Five-year returns (in %)

Quant Multi Asset Fund

32.34

ICICI Prudential Multi Asset Fund

24.03

UTI Multi Asset Allocation Fund

18.59

HDFC Multi Asset Fund

17.08

SBI Multi Asset Allocation Fund

16.05

Axis Multi Asset Allocation Fund

12.74

Source: AMFI (As of February 28, 2024)

Should you invest in a multi-asset fund?

Though multi-asset allocation mutual funds may appeal to risk-averse investors aiming for relatively stable returns, it is crucial to develop a more nuanced comprehension of their appropriateness. Because of diversification, these funds typically present lower risk in comparison to pure equity funds. This could be appealing if you find substantial fluctuations in your investment value discomforting.

Furthermore, even though stability is emphasized, consistent returns are not assured. While fluctuations are generally less pronounced than in pure equity funds, these multi-asset funds can still experience variations. Their returns might also trail behind those of pure equity funds during robust market upswings.

Ideally suited for extended investment horizons, typically five years or more, these funds are designed to navigate through market cycles and potentially yield more consistent returns over time.

With numerous schemes at your disposal, it is essential to contemplate your personal investment objectives, risk tolerance, and investment horizon before selecting a particular multi-asset mutual fund. Seeking guidance from a financial advisor can prove beneficial in making an informed decision tailored to your circumstances.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

 

 

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Published: 01 Mar 2024, 09:30 AM IST
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