Multi Asset Investing: A Smooth Ride To Achieving Financial Goals By Mohit Gupta, Director, Infinity Finserv (P) Ltd

Each investment has a purpose of fulfilling life's various financial goals in a stipulated time frame. However, often a poor investment experience creates hurdles in achievement those goals as investors tend to terminate or prematurely withdraw their investments. As a result, no purpose is fulfilled - neither does the investment complete its tenure nor is financial goal achieved. In short, the very purpose of investment stands defeated; and this is quite a common phenomenon among majority of investors.

In order to ensure a happy investment experience, investments have to be properly strategized. It is here that multi-asset investing becomes relevant.

What is Multi-Asset Investing?

As is clear by the name, multi-asset investing means putting your hard earned money in several asset classes instead of just one or two. Each asset class has its unique market cycles, risks and valuation dynamics. Also, each asset class responds differently to a macroeconomic development. As a result, the strategy to spread investments across asset classes ensures that the portfolio is not adversely affected in any situation.

However, what is often observed is that investors tend to load their portfolio with an asset class of one’s choice. As a result, in the event of any adverse development in that asset class, the entire portfolio gets impacted because of the overweight stance in that one particular asset class. In other words, such an investment approach leads to significant concentration risk. By multi-asset investing, the concentration risk stands reduced to a large extent as investors' portfolios is diversified across several asset classes.

For instance, of late, the equity market has been very volatile due to geo-political tensions. At the same time, debt has been stable and due to these uncertainties, gold rallied. In effect, thanks to the presence of debt and gold, the overall impact on the portfolio of the downturn in equities has been minimal. Over long term, it has been observed that multi-asset investing tends to deliver a smooth, risk-adjusted and inflation-beating return.

Relevance in Current Times

Though Multi-Asset investing is an evergreen strategy, its importance and relevance increase manifolds during uncertain times as we are witnessing currently. Given the heightened geopolitical tensions and expectations of it to prolong, multi-asset investing is the way to go ahead. Now is an opportune time to follow multi-asset strategy by diversifying investments to asset classes other than equities as well.

Multi Asset Funds

It is possible that a lay investor may find it difficult to adopt a multi-asset investment approach due to their lack of expertise or due to lack of time to track several asset classes. It is here that mutual funds come as a handy investment tool. The category of multi-asset mutual fund schemes, with its professional management by expert fund managers and investment team, invests in three more asset classes within a single fund.

Not only does it save investors' energy and time, but also keeps the investment well-tuned to the prevailing market conditions. Investors who desire to ride the uncertainties with smooth investment experience and fulfil various financial goals may consider investing in multi-asset mutual fund schemes.

Most often the asset classes which form a part of such a portfolio comprises of equity, debt, commodities, real estate tec. The exposure to equity brings in the growth element to the portfolio while allocation to debt offers stability. On the other hand, exposure to gold provides a strong hedge against inflation while allocation to real estate instruments like REITs and InVITs helps boost the portfolio yield. Given the diversified investment approach, over long term, the investment experience tends to be better, as the volatility in the portfolio tends to be contained to a large extent.

It needs to be noted that portfolios which follow multi-asset strategy are well equipped to tide over the economic uncertainties efficiently during the course of investment. In fact, historical trends suggest that investors who followed asset allocation through multi-asset investing have emerged wealthier despite several crises during the investment tenure.

To conclude, if an investor is unsure how to go about investing in the current uncertain times, then investing lump sum or through SIP in a multi asset offering can be a good starting point.