Why multi-asset investing is important

Gold is another asset class that is very popular in India. In the portfolio, the yellow metal has a certain function to do. Its existence serves as a safeguard against other asset classes' volatility and inflation. The yellow metal typically performs quite well when there is heightened uncertainty due to events such as geopolitical circumstances, fears of a recession, and the like. Since there is no correlation between debt, stock, and gold, having all three of these asset types is advantageous for investors in the long run.

It is not simple to construct a portfolio that includes a variety of asset classes. The simplest aspect of the transaction is making individual investments in each of the asset groups. Once completed, however, this would include monitoring all changes in each of these asset types, their triggers, and adjusting the portfolio as needed. It is possible that a layperson lacks the knowledge necessary to take the appropriate action. Additionally, depending on the length of holding, an investor may be subject to short- or long-term capital gains tax when the portfolio is rebalanced. To circumvent this challenge, mutual fund companies have a hybrid fund category offering specifically addressing this requirement.

The multi-asset category fund by mandate must invest in three or more asset classes. Most of the fund houses cover equity, debt and commodities in the fund. Some fund houses also offer REITs and InvITs. Each of these asset groups contributes significantly to the portfolio's diversification. In effect, within a single fund, an investor will get access to most of the asset classes without any hassles.

Given that a seasoned fund manager will be managing the portfolio, an investor need not worry about rebalancing. Here, the fund manager on behalf of the investor will do the needful as per the changes in the market and economy. Also, when the buy and sell transactions are done at a fund level, an investor will not incur the short or long term capital tax, making it a win-win for the investor.

To conclude, multi-asset fund is an optimal choice to navigate the current market conditions. Given the nature of the fund, an investor can consider lumpsum investment in the fund.

Note: The author, Swati Joshi is Director of Moneybolism Financial Services Private Limited. The views expressed are of the author and do not reflect that of CNBCTV18.com or its affiliates.

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