Multi-asset investing offers a smart way to spread your investment across different asset classes. For growth markets like India, multi-asset portfolios offer the right mix of equity, debt, gold and silver, providing growth, stability and hedge against inflation
India’s stock market has been a beacon of resilience. With the Sensex posting annual gains of over 8% in 2024, it marked a remarkable ninth consecutive year of positive returns. This momentum, however, comes with its share of hiccups. In the past month alone (as of January 10), the Sensex has corrected by 5%, a sharp reminder of the market’s inherent unpredictability.
For investors, such volatility can be unsettling. But there’s a way to manage these swings without losing sleep: multi-asset investing. By spreading investments across different asset classes, it creates a portfolio that is less vulnerable to market upheavals and better equipped to deliver consistent returns.
At its heart, multi-asset investing is about striking a balance. Instead of putting all your money in one type of investment, you spread it across various asset classes like equities, bonds, gold ETF, silver ETF, exchange-traded commodity derivatives (ETCDs), REITS and INVITS.
For growth markets like India, multi-asset portfolios often lean on a mix of equity for growth, debt for stability, and gold or silver ETFs as a hedge against inflation. This strategy works because each asset behaves differently during economic cycles. When one stumbles, another often steps up.
Think of multi-asset investing as building a cricket team. You wouldn’t fill the line-up with just batsmen or bowlers. Instead, you’d ensure a mix of players who can handle different challenges—be it aggressive opponents or tricky pitches.
Similarly, a multi-asset portfolio ensures you’re not overly reliant on the performance of a single asset class. Equities might soar during a booming economy but falter during downturns. In contrast, gold often shines when markets are turbulent. Debt instruments provide a steady stream of income regardless of market conditions.
Think of multi-asset investing as building a cricket team. You wouldn’t fill the line-up with just batsmen or bowlers. Instead, you’d ensure a mix of players who can handle different challenges—be it aggressive opponents or tricky pitches.
This diversification isn’t just a safety net; it’s a strategy to achieve smoother, more consistent returns. Over the years, multi-asset investing has shown their mettle by delivering stable performance, even during economic uncertainty. Equities boosted the portfolios in years like 2014, 2017, 2019, 2020, 2021, 2023 but when stocks tank like in 2011 and 2015, debt/fixed income and gold help steady the ship.
Multi-asset investing isn’t about throwing investments together at random. It’s a deliberate, well-thought-out process. With careful bets on different asset classes, your portfolio is always present in the right asset class at the right time.
Investment managers typically use two approaches. The first is strategic allocation, where assets are distributed in fixed proportions aligned with long-term goals. The second, tactical allocation, is more dynamic. Here, managers adjust the portfolio to take advantage of short-term market trends.
For instance, if equities are undervalued during a market correction, the portfolio may tilt towards stocks. Conversely, during inflationary periods, gold or debt may take centre stage. The key is to align this strategy with an investor’s risk tolerance and goals.
India’s economy is a dynamic mix of opportunity and uncertainty. With rapid growth, inflationary pressures, and global linkages, the financial landscape is constantly evolving. Multi-asset investing helps Indian investors navigate this challenge.
For retail investors, multi-asset mutual funds are a boon. They simplify the process, remove tax complexities, and smartly utilise professional management.
Whether you’re saving for your child’s education, planning for retirement, or just looking to grow wealth, multi-asset portfolios fit seamlessly into your financial goals.
Disclaimer: The Views are Personal and not a part of the Outlook Money Editorial Feature