Multi Asset Allocation Funds: Diversified Hybrid Investment

What is a Multi-Asset Allocation Fund?

A multi-asset allocation is a type of hybrid mutual fund which invests its portfolio in three different asset classes like equity, debt, gold, real estate, etc. The portfolio aims to give you exposure to different assets for attractive returns while reducing investment risks.

Advantages of Multi-Asset Allocation Funds

Portfolio diversification

Enjoy a diversified portfolio of three different asset classes and earn returns however the market performs.

Automatic rebalancing

The portfolio is automatically rebalanced so you don’t lose out on the investment returns while the risk is kept low.

Easy entry and exit

Invest in the fund or redeem your investment whenever you want to without incurring any entry or exit load.

Reduced Portfolio Volatility

Diversifying across three or more asset classes can help cushion the portfolio against volatility in any single asset class, potentially leading to more stable overall returns.

Multi-Asset Allocation Funds Returns Calculator

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Understanding Multi-Asset Allocation Funds

Table of Contents

What are Multi-Asset Allocation Funds?What are the features of Multi-Asset Allocation Funds?What are the different types of hybrid funds?What should be the investment horizon for Multi-Asset Allocation Funds?What is the tax implication of Multi-Asset Allocation Funds?What are the payout options?Who should invest in conservative hybrid funds?

What are Multi-Asset Allocation Funds?

Multi-Asset Allocation Funds are diversified hybrid mutual fund schemes that invest at least 10% of their portfolio in three different asset classes. Fund managers can choose from equity, debt, gold, real estate, and other types of assets for portfolio allocation.

What are the features of Multi-Asset Allocation Funds?

Minimum 10% allocation in each of the three types of asset class
Diversified portfolio generates good returns while keeping the risks low
Suitable for investors who are looking for portfolio diversification and want to invest for a medium to long-term horizon
Invest through SIPs or lump sum

What are the different types of hybrid funds?

Aggressive Hybrid Funds

Funds that invest 65% to 80% of their portfolio in equity securities and 20% to 35% in debt

Equity Savings Funds

Funds that invest in equity, debt and arbitrage opportunities. A minimum of 65% of the portfolio is invested in equity and 10% in debt

Balanced Hybrid Fund

Hybrid funds which invest 40% to 60% of the portfolio in equity and the remainder in debt

Arbitrage Funds

Funds that invest in arbitrage opportunities. At least 65% of the fund is invested in equity

Conservative Hybrid Fund

Funds that invest at least 75% to 90% of the portfolio in debt and the rest in equity.

What should be the investment horizon for Multi-Asset Allocation Funds?

Most Multi-Asset Allocation Funds have a considerable exposure to equity
Since equity faces a short-term volatility risk, investing for the medium or long-term horizon is suitable
A horizon of 3 or more years is recommended
It also helps in earning attractive returns
If the scheme is equity-oriented, you also get tax benefits for staying invested for 12 or more months

What is the tax implication of Multi-Asset Allocation Funds?

The tax implication depends on the portfolio composition
If the Multi-Asset Allocation Fund has a minimum of 65% exposure to equity, it is eligible for equity taxable
Under equity-oriented funds, returns earned within 12 months would be taxed at 15%
Returns earned after 12 months would be tax-free up to Rs.1 lakh
Excess returns would attract a 10% tax
If the Multi-Asset Allocation Fund does not have a minimum of 65% equity exposure, it would attract debt taxation
The returns earned are taxed at your income tax slab rates
Dividends earned, if any, from either equity or debt-oriented funds are taxed at your income tax slab rate

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

Who should invest in conservative hybrid funds?

New investors

You can protect against high volatility risks of equity by diversifying your portfolio with other asset classes
Investors looking for good returns

You can earn good returns with exposure to different types of assets in your portfolio.
Investors with a medium to long-term horizon

If you are looking to invest for 3 or more years, Multi-Asset Allocation Funds would be a suitable choice

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FAQs On Multi-Asset Allocation Funds

Multi-Asset Allocation Fund is a type of hybrid mutual fund which invests the funds in a diversified portfolio with at least 10% of the value in three or more classes of assets as per the guidelines issued by SEBI. Multi-Asset Allocation Funds as its name suggests typically have allocation to multiple assets including debt instruments, equity instruments and another class of asset such as gold, commodities, real estate, etc. The goal is to provide a balance between return and risk by diversifying the portfolio across different asset classes.

Diversification in multi-asset allocation helps lower the risk of volatility in any asset class. Investing in a mix of different asset classes, such as equity, debt and other assets, aims to decrease the impact of poor performance in any single asset category. Diversification helps to enhance the overall returns of the portfolio and manage risk.

The taxation of Multi-Asset Allocation Funds depends on the holding period and type of mutual fund scheme you have invested in. If the fund's equity exposure is higher than 65%, it is taxed as an equity-oriented fund. Similarly, if the debt allocation is higher, it is taxed as a debt fund. Equity-oriented funds with a holding period of less than 12 months are taxed at 15% as short-term capital gains , and for a holding period of more than 12 months, are taxed at 10% with an exemption of up to Rs. 1 lakh as long-term capital gain. Debt-oriented funds having a holding period of less than 36 months are short-term capital gains taxed at the applicable income tax slab rate, and those having a holding period of more than 36 months are taxed as long-term capital gain at 20% with indexation benefits.

Exit load vary for mutual funds. Multi-Asset Allocation Funds generally have an exit load of 1-2% for redemptions made within a specified period. Check the exit load applicability and charges before investing.

Investors can withdraw/redeem their Multi-Asset Allocation Fund at any time. However, check the exit load charges which might be applicable for early redemption or redemption within the specified lock-in period, if any.