Diversify Your Investments with Multi-Asset Strategies

If you don’t want all your investment to be in Equity Mutual Fund (Stocks) and diversify investment into different other types of Assets like Stocks(Equity), Debt/Bonds, Gold or even Real estate, all through one or two Mutual Funds, that is also possible. Investment in multiple Asset Classes provides better downside protection when Stock Markets go through downturn.

Multi Asset Mutual Funds

As the name suggests, it invest in multiple assets like Equity(Stocks), Debt, Gold/Silver and others like Real Estate or even International Equities. These funds can move their capital between different assets at different times based on current situation . The objective is to achieve diversification by investing across different types of assets that perform differently under various market conditions.

Key Features and Benefits of Multi-Asset Funds:

• Minimum Three Asset Classes: SEBI regulations mandate that these funds must invest in at least three asset classes, with at least 10% allocation to each.
• Risk Mitigation: By spreading investments across multiple asset classes, multi-asset funds provide better risk management. When one asset class underperforms, another may offer stability, reducing overall portfolio volatility.
• Diversification: The primary benefit is diversification. Different assets tend to perform differently based on market conditions. For instance, when equity markets are volatile, debt or gold may provide stability, ensuring a smoother return profile.
• Active Asset Allocation: Fund managers have the flexibility to adjust the allocation between asset classes based on market conditions. This active management approach can help capture upside opportunities while limiting downside risks.
• Inflation Hedge: Asset classes like gold and real estate can act as a hedge against inflation, offering protection during inflationary periods.
• Convenience: Investors gain exposure to multiple asset classes through a single fund, eliminating the need to manage separate investments in equities, debt, and commodities.

Popular Multi-Asset Funds in India:

1. ICICI Prudential Multi-Asset Fund
2. Aditya Birla Sun Life Multi-Asset Allocation Fund
3. Nippon India Multi-Asset Fund
4. HSBC Multi-Asset Fund

Hybrid Funds

Hybrid Funds just invests in Equity and Debt. These funds aim to achieve a balance between capital appreciation (through equity) and income generation (through debt), making them suitable for investors with varying risk appetites.

Types of Hybrid Mutual Funds in India:

SEBI has classified hybrid funds into several categories based on their equity and debt exposure:

• Aggressive Hybrid Fund:
  • Invests 65-80% in equities and the remaining in debt.
  • Suitable for investors who want higher equity exposure but with some debt allocation to mitigate risk.
  • Example: SBI Equity Hybrid Fund
• Conservative Hybrid Fund:
  • Invests 75-90% in debt and the rest in equity.
  • Ideal for conservative investors looking for stable income with a limited exposure to equity for growth.
  • Example: ICICI Prudential Regular Savings Fund
• Balanced Advantage Fund (BAF) or Dynamic Asset Allocation Fund :
  • These funds dynamically adjust equity and debt allocation based on market conditions.
  • Suitable for investors who prefer flexibility in asset allocation depending on the market outlook.
  • Example: HDFC Balanced Advantage Fund
• Equity Savings Fund:
  • Invests in a mix of equities, debt, and arbitrage opportunities. The arbitrage portion helps in lowering volatility.
  • Ideal for investors seeking moderate equity exposure with lower volatility.
  • Example: Nippon India Equity Savings Fund
• Arbitrage Fund:
  • These funds exploit price differences in the cash and derivatives market. While classified as equity for tax purposes, arbitrage strategies reduce the risk.
  • Suitable for risk-averse investors.
  • Example: Kotak Equity Arbitrage Fund

Advantages of Hybrid Funds:

• Diversified Portfolio: Hybrid funds provide exposure to both equities (growth potential) and debt (stability), offering a balanced risk-reward profile.
• Tailored to Risk Appetite: Investors can choose between aggressive, conservative, or dynamic hybrid funds based on their risk tolerance and investment horizon.
• Regular Income: Conservative hybrid funds and balanced advantage funds can provide a regular income stream for investors, especially those approaching retirement.

There are few dozens of these types of Mutual Funds which makes it difficult choose as historical return cannot be the only factor for choosing. We can help you find the right Mutual Fund investment strategy for you.