Are multi-asset funds a smart choice for volatile markets?

Considering the market volatility, is it prudent to invest in multi-asset funds which have a mix of commodities, equities, debt, and real estate?

Multi-asset funds follow a diversified approach by investing in at least three asset classes generally equity, debt, and gold.

Let's examine whether this approach offers any added advantage or not. We'll look at the performance of three kinds of portfolio mixes: all-equity, equity-debt, and a blend of all three (equity, debt, and gold).

Suggested read: Multi-asset funds 101: What you need to know

Looking at the ten worst declines of the Sensex, the steepest drop occurred in October 2008, when equity plummeted nearly 22.5 per cent in just one month. During the same period, gold also fell, as did a diversified portfolio combining gold, equity, and debt.

In certain declining phases, gold managed to fall slightly less than equity, but the difference wasn't significant enough to act as a substantial safeguard. The only exception was 2008, where gold clearly withstood the decline better. In most other cases, a combination of equity and debt provided similar levels of protection.

Conclusion

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Also read: How to invest Rs 30 lakhs the right way

This article was originally published on December 13, 2024.