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    Demystifying Multi-Asset Allocation Funds: Debunking 5 Common Misconceptions

    Aug 30, 2024
    5 min
    4 Rating

    Multi Asset Allocation Fund is the type of mutual fund scheme that invests in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes Although this fund can offer a new way of investing in mutual funds, it has to deal with some rumors that need to be debunked.

    The following are the misconceptions about Multi Asset Allocation Fund that may stop investors from investing in this category. Kindly read them carefully to have some clarity.

    Also Read : What is Multi Asset Allocation Fund?

    1. Multi Asset Allocation Funds are risk-free.

    All mutual funds come with a certain degree of risk, and MAAF is no different. The common misconception that MAAF is risk-free may confuse investors. These funds aim to spread risk by diversifying across multiple asset classes, but they are not risk-free. The level of risk depends on market conditions and how assets perform during those conditions.

    2. All Multi Asset Allocation Funds are the same.

    Multi Asset Allocation Funds may have similar skeletal structures. However, they are not similar in their asset allocation and investment strategies. These funds can have different levels of risks and asset allocation approaches (like Strategic Asset Allocation and Tactical Asset Allocation applied w.r.t. different market conditions), making it essential for investors to carefully review the details of each fund before investing.

    3. Multi Asset Allocation Funds have high fees.

    Some investors assume that Multi Asset Allocation Funds charge higher fees; however, the expense ratios of these MAAFs vary according to different fund houses. The fees are charged according to their diversified portfolio, management fees, operating costs, etc.

    4. Multi Asset Allocation Funds guarantee positive returns.

    No fund guarantees positive returns all the time. The funds’ performances depend on the market conditions. Therefore, assuming Multi Asset Allocation Funds will give positive returns is incorrect. The fund managers devise various fund strategies constantly to keep up with the market volatility. Therefore, ups and downs in returns are expected.

    5. Multi Asset Allocation Funds are not suitable for retirement planning.

    Multi Asset Allocation Funds can be opted by retired people due to their diversified portfolio and professional fund management benefits. Retired people need capital appreciation to accumulate enough wealth to support in those days. Therefore, they can choose these funds for their retirement planning.

    Conclusion

    Investors should understand the fund’s objective, historical performance, and investment strategy and should clarify any doubts before investing in this category.

    The sector(s)/stock(s) mentioned herein do not constitute any research report/recommendation of the same and the Fund may or may not have any future position in these sector(s)/stocks(s). Aditya Birla Sun Life AMC Limited/Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments.

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.