In the ever-evolving landscape of investment options, mutual funds stand out as a popular choice for investors seeking long-term growth and diversification. Among the array of mutual funds available, multi-asset mutual funds have gained traction in recent years, offering investors a diversified blend of asset classes to navigate through market cycles. In India alone, there are over 15 multi-asset mutual fund schemes, each mandated to allocate a minimum of 10% to at least three distinct asset classes, providing investors with a diversified asset mix comprising equities, debt, and other assets such as gold and real estate investment trusts (REITs).
Understanding Multi-Asset Mutual Funds
Diversified Asset Mix
Multi-asset mutual funds typically blend stocks, bonds, and an additional asset class, aiming to spread risk across various asset classes for potentially smoother returns.
Diversification
The core principle behind multi-asset funds is diversification, distributing risk across different asset classes to mitigate volatility and potentially provide stability.
Allocation by Fund Manager
The fund manager plays a crucial role in dynamically overseeing the distribution across various asset classes, making adjustments in response to market conditions and their outlook.
Risk-Return Profile
The risk-return profile of multi-asset funds varies depending on the asset allocation strategy implemented by the fund manager, catering to a broad spectrum of investor risk appetites.
Benefits of Including Multi-Asset Funds in Your Portfolio
- Reduced Risk: Compared to many hybrid funds, multi-asset funds offer reduced risk due to their diversified nature.
- Stability: These funds provide relatively stable returns, appealing to risk-averse investors uncomfortable with significant fluctuations.
- Long-Term Investment Horizon: Multi-asset funds are suitable for an investment timeframe of at least three years, ideally suited for extended investment horizons.
Should You Invest in Multi-Asset Funds?
While multi-asset allocation mutual funds may seem appealing for their stability and reduced risk, it’s essential to understand their appropriateness for your investment goals. Although these funds generally offer lower risk compared to pure equity funds, consistent returns are not guaranteed, and they may lag during robust market conditions.
Investing in multi-asset funds is ideal for those with a long-term investment horizon of five years or more, as these funds are designed to navigate through market cycles and potentially yield more consistent returns over time. However, selecting the right multi-asset fund requires careful consideration of your financial objectives, risk tolerance, and investment horizon.
Top Mutual Funds to Invest in 2024
As investors navigate the dynamic landscape of mutual funds, considering the top performers becomes crucial. Here are the best mutual funds to invest in 2024 based on their past one-year returns:
Large Cap Funds
- Taurus Large Cap Fund: 36.72%
- Quant Large Cap Fund: 49.24%
- JM Large Cap Fund: 38.25%
- Bank of India Bluechip Fund: 39.10%
- Nippon India Large Cap Fund: 36.10%
Large-cap funds are suitable for risk-averse equity investors seeking stability, offering relatively stable returns and lower volatility compared to mid-cap and small-cap schemes.
Mid Cap Funds
- HDFC Mid-Cap Opportunities Fund: 53.75%
- HSBC Midcap Fund: 50.64%
- Mahindra Manulife Mid Cap Fund: 58.59%
- JM Midcap Fund: 57.90%
- Quant Mid Cap Fund: 60.24%
Mid-cap mutual fund schemes provide diversification due to investments in medium-sized companies with strong growth potential, albeit with higher risk compared to large-cap funds.
Value Funds
- Quant Value Fund: 65.44%
- Nippon India Value Fund: 54.11%
- JM Value Fund: 59.08%
- HSBC Value Fund: 50.03%
- ABSL Pure Value Fund: 54.43%
Value funds aim to invest in undervalued stocks, potentially offering higher returns over the long term.
In conclusion, while multi-asset mutual funds offer diversification and stability, selecting the right fund requires a thorough evaluation of your investment objectives and risk tolerance. Consulting with a financial advisor can provide valuable insights tailored to your financial goals, ensuring informed investment decisions for a prosperous future.
