Why Investing in a Multi-Asset Allocation Fund Makes Sense in a Volatile Market

The last two years have been marked by heightened volatility in financial markets in India. Apart from the pandemic, the Russian invasion of Ukraine, the sharp rise in crude oil prices, the weakening of the Indian rupee and the second wave of Covid-19 could be considered as a few contributors to this market upheaval. . Many financial experts are of the opinion that this intense market volatility, especially in stock markets, may continue for a considerable period of time. With such periods of uncertainty looming on the horizon, it may seem prudent for investors to spread their investments across multiple asset classes. This is where it may make sense to opt for a multi-asset investment due to market volatility.

Investors can pay attention to the immortal words of Benjamin Grantham, which were –
“There is a close logical connection between the concept of margin of safety and the principle of diversification.’ This statement can find its modern interpretation in asset allocation done through multi-asset allocation schemes. Choosing this type of scheme could help investors gain the required exposure to multiple asset classes such as stocks, debt, gold, etc. So, in the event that one of the asset classes faces a downtrend, there are other asset classes that could help an investor with capital protection and more or less stable returns in time.

In addition to the balance of these mutual funds, here are two other reasons why multi-asset investing through multi-asset mutual funds makes sense in a volatile market –

Fund management expertise

Market volatility can lead to panic selling/buying due to worrying sentiments that quickly spread through the markets. In times like this, when there is a good chance that a theoretical loss will turn into an actual loss, most investors may not have the necessary information to enter or exit the markets. A multi-asset allocation fund can offer investors the expertise of fund managers and their team. These professionals might be able to research and select appropriate securities to rebalance an individual’s portfolio based on their risk appetite and goals.

Exposure to various asset classes

The choice of multi-asset allocation funds can allow investors to invest in all asset classes, including stocks, debt, gold, etc. This exposure may be relevant to the financial goals of investors who wish to continue investing for the long term. Generally, multi-asset mutual funds are required by SEBI (Securities and Exchange Board of India) to invest in at least three asset classes with a minimum allocation of at least 10% each across the three asset classes. This variety can help investors diversify their portfolio when choosing a multi-asset allocation investment.

It is important for investors to assess their financial goals, risk appetite and investment horizon before making investment decisions.


An investor education initiative.

Visit www.icicipruamc.com/note to learn more about the process to complete a unique know-your-client (KYC) requirement for investing in mutual funds. Investors should only deal with registered mutual funds, details of which can be checked on the SEBI website http://www.sebi.gov.in/intermediaries.html. For questions, complaints and grievance redress, investors may contact the AMCs and/or the Investor Relations Officers. Moreover, investors can also lodge complaints on https://scores.gov.in if they are not satisfied with the resolutions given by the AMCs. The SCORES portal allows you to file your complaint online with SEBI and then view its status.

Investments in mutual funds are subject to market risk, read all plan documents carefully.


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