Keen on Constructing an All-Weather Portfolio? Try Multi-Asset Investing

In January of 2024, Saurabh completed one year in his new job and to commemorate the occasion and optimise his financial wellness in the years ahead, he decided to begin his investment journey on his first work anniversary. During his research into the stock market and the nuances of the fixed-income investment scenario, Saurabh came upon the concept of multi-asset investing and found it extremely intriguing. While he was no expert at investments or building a portfolio, he did realise the wisdom in creating a portfolio which would stand the test of time and offer him solid returns across varied market conditions.

Understanding multi-asset investing:

Multi-asset investing is a strategic portfolio management method that entails distributing investments across a range of asset classes instead of concentrating solely on one, such as stocks or bonds. The aim is to mitigate risk and potentially boost returns by leveraging the performance characteristics of different asset classes. You can undertake multi-asset investing by allocating your corpus across different asset classes, such as equity, bonds, gold and real estate, in line with your personal investor profile, which consists of aspects such as your risk appetite, return requirement, time horizon and investment goals. For instance, when Saurabh started investing, his first financial goal was to purchase a car three years down the line, for which he would require a corpus of about Rs 10 lakhs. Given the short-term nature of the goal and his ability to withstand high risk in the quest for high returns, he decided to invest about 40% of his corpus in equities and the remaining in debt instruments. Similarly, you can also undertake multi-asset investing in alignment with your unique investor profile to ensure optimal outcomes.

Why choose this strategy?

The multi-asset investing strategy offers investors a unique opportunity to tap into the growth potential of equities, the stability of fixed income, and the hedging properties of commodities like gold. By diversifying across multiple asset classes, the all-weather strategy effectively mitigates the volatility of stocks and the comparatively lower returns of pure debt investments, appealing to risk-averse investors seeking stable returns. This portfolio strategy has gained significant popularity amid today’s volatile market conditions, providing investors with diversified portfolios tailored to navigate different market cycles. Additionally, the strategy is extremely flexible in nature, enabling investors to alter the composition of their portfolios based on their financial goals. For instance, in the portfolio curated for his retirement, Saurabh has chosen to focus on safer asset classes like debt and gold while utilising equity in a measured manner to add firepower and bolster returns.

Multi-Asset Allocation Funds:

While Saurabh has taken the time to research the market and is undertaking portfolio construction in an active manner, you need not follow the same approach to build a multi-asset portfolio. The alternate route to pursue multi-asset investing is through multi-asset allocation funds, which invests across a range of asset classes such as stocks, bonds, commodities, and real estate to name a few. Typically, these funds allocate a minimum of 10% of their assets across three or more asset classes, offering diversification within a single mutual fund scheme.

For first-time investors who are not well-versed with the investment scenario, multi-asset investment funds can be a great option to attain optimal diversification without actually spending time in the market. Additionally, through such schemes, investors can also garner exposure to a multi-asset portfolio by way of a single investment, making the journey more convenient and efficient. Multi-asset allocation funds also offer the convenience of automatic portfolio rebalancing, helping investors navigate market fluctuations without the need for active trading. Unlike personalised portfolio management services, investing in multi-asset allocation funds is cost-effective.

As an investor, there are two things you need to focus on – managing risk and garnering the highest possible returns. With multi-asset investing by your side, you can accomplish both these goals simultaneously. Given the nature of the fund, they can also be considered for lump sum investment, irrespective of the market conditions. If you are unsure at any point in this journey, do consult a financial advisor to know more about asset allocation funds and how you can invest in these funds for a balanced portfolio.