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Multiple-asset mutual fund is not yet tested. Find out If its for you

 

INSTEAD of keeping all eggs in the same basket, keeping different eggs in different baskets reduces risk

THE more the merrier or so the adage goes. But does it hold true for mutual funds that simultaneously invest in stocks, bonds and gold?


Financial experts point out that while investors need to look at diversification, they should not over-diversify so that the share of asset allocation for stocks, bonds or gold does not stray from their pre-decided levels.

Here are the pros and cons of investing in a multiasset mutual fund: Multiple play: Schemes, such as ING Optimix Financial Planning, Peerless MF Child, Fidelity India Children's Marriage, Kotak Multi Asset Allocation, Axis Triple Advantage, Taurus MIP Advantage and Religare MIP Plus, are hybrid funds that combine three asset classes. Depending on the fund's intent, some schemes are heavily tilted towards gold, while some others are heavily biased towards debt or stocks.

For an investor, these funds are just a convenient tool. Instead of keeping all eggs in the same basket, one can keep different eggs in different baskets. That reduces risk. But, in reality, investors are usually too lazy to do that. They will prefer a grocery-store approach, where if the same fund is giving them exposure to different asset classes, that's convenient for them.


Check performance: Most of these funds have been launched in the past 12 months. So, no measure of long-term performance is available. It is important that investment in any fund, not just any special class, stands the test of time -a minimum three to five years have to pass to get a realistic view.

Of course, one can miss out on any upside in a rookie fund, but that's a risk. Any new fund offer (NFO) is like a trainee in a company. They may have potential but lack any record. These multi-asset funds are good idea, but we think its better to monitor the performance for some time before jumping in. An 8 per cent return in a volatile situation may sound good when compared with tax-adjusted returns of fixed deposits.

Long-term attraction: For children funds, the reasoning for addition of gold into these schemes is a hedge against possible rise in gold price. But, one can do by just investing in gold ETFs too. But a one-stop solution sounds attractive. The thing is such schemes allocate portions of your money into the assets. So, if you want to buy Rs 1 lakh of gold now, its better to go for gold ETFs. If you want to distribute the same Rs 1 lakh over different assets, then multi-asset schemes are good. Some companies appoint different managers to oversee different assets. This is good because an expert in stocks cannot take the right decisions on debt or even gold.

 

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