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Well, what if we told you that there is a type of financial instrument that may take the headache of work (read asset rebalancing) away from you? The answer lies in multi-asset funds. This financial instrument helps navigate between the various asset classes. Such funds reduce the investment woes of the investor. But here too, at the end of the day, long-term vision is needed. Who should invest in multi-asset funds? "Multi-asset funds are highly relevant for retail investors seeking a balanced, hassle-free investment approach," says Ankur Punj, MD & National Sales Head - Equirus Wealth Management. Such funds invest across equity, debt, and gold (or other assets), offering a built-in diversification that helps reduce market risk and smooth out returns. For investors who lack the time, expertise, or emotional discipline to rebalance portfolios themselves, multi-asset funds provide professional management and dynamic asset allocation. Especially in today's volatile markets, these funds act as a cushion-when equities dip, debt or gold components can stabilise the portfolio. In fact, multi-asset funds have come into the investing world for a reason - to take the onus of rebalancing your portfolio away from you. The knack of knowing when to sell a particular asset is psychologically difficult. After all, who would want to sell an asset when it is appreciating in value? That sounds like a counterintuitive prospect, correct? But elevated levels (read value has been reached) are the very time that an investor must sell from the asset class or use an equity term to book profits. That's when the psychological hang-up starts, and that is precisely what multi-asset funds have a remit to take away from you. "Yes, multi-asset funds are designed to take the burden of portfolio rebalancing off retail investors-and they've been quite successful in doing so," says Punj. These funds invest across equity, debt, and gold, with fund managers dynamically adjusting allocations based on market conditions. This means investors don't need to worry about when to book profits or shift between asset classes. Historically, multi-asset funds have delivered strong returns, averaging over 16% in the past three years, with some funds exceeding 20%. Their performance during volatile periods, like global trade disruptions, highlights their ability to manage risk through strategic reallocation. "Retail investors often hesitate to sell winning assets or rebalance portfolios due to emotional biases," say experts. Multi-asset funds automate this process, offering disciplined diversification and smoother returns. While not fixed income generators, they provide a balanced approach that many individual investors struggle to replicate on their own. Here's where the going gets tricky. Drawbacks of multi-asset funds While these funds reallocate across asset classes depending on their internal asset allocation models, it's never a one-size-fits-all solution for an investor, says Kaustubh Belapurkar, Director, Morningstar Investment Research India. Investors need to look at the overall fit of the fund in their portfolio and resultant allocation from the context of their desired allocation mix. While these funds may partially help in rebalancing allocation, experts feel that investors may need to carry out additional rebalancing depending upon their portfolio's unique requirements. "For long-term wealth creation, multi-asset funds are generally sub-optimal for retail investors," says Harsh Gahlaut, Co-founder & CEO, FinEdge. The very essence of compounding wealth lies in holding a meaningful allocation to high-growth assets, primarily equities, for extended periods. By their very doctrine, multi-asset funds allocate a significant portion (often 30-50%) to debt and gold, which can dilute equity exposure and, in turn, reduce long-term growth potential, explain analysts. The recent popularity of these funds is largely driven by short-term trends, equity market volatility over the past two years and exceptional gold performance. However, for most Indian households, existing exposure to debt and gold is already substantial through fixed deposits, life insurance policies, provident funds, physical gold, and real estate. Adding a multi-asset fund on top of this can unintentionally skew overall asset allocation further away from growth assets, say experts. "Where they do make sense is for investors whose primary goal is wealth preservation rather than wealth creation, for example, those approaching retirement or seeking lower volatility," advices Gahlaut. For everyone else, a well-planned, goal-based allocation, periodically rebalanced, is a more effective way to build wealth over decades. "While Multi Asset funds could be a part of an investor's portfolio, they shouldn't be the entire investor's portfolio," says Belapurkar. What the investor can expect from multi-asset funds Multi-asset mutual funds do not offer fixed monthly or quarterly income like traditional income funds, but they can provide relatively steady returns over time due to their diversified nature. The remit of such funds is to reduce volatility and smooth out performance across various market cycles by investing across equity, debt, and gold. Top-performing multi-asset funds have delivered consistent 3-year annualised returns between 15% and 23%. While "They aren't ideal for regular income needs; they are suitable for investors seeking moderate, stable growth rather than unpredictable swings. For predictable cash flows, other options like SWPs or income-focused funds may be more appropriate," says Punj. "Investors should NOT look to Multi Asset funds to give consistent/steady returns," cautions Belapurkar, who advises investors looking to generate steady and regular income to look for products with exposure primarily to asset classes such as fixed income that have more predictable outcomes. Your check-list Prior to investing in multi-asset mutual funds, retail investors should conduct thorough due diligence to ensure the fund aligns with their goals and risk appetite. The key differentiators include, Review the fund's investment strategy: Understand how the fund allocates across equity, debt, and gold, and whether it uses a fixed or dynamic approach. Assess the fund manager's track record: Look for consistent performance and experience in managing multi-asset portfolios. Check historical returns and volatility: Evaluate how the fund has performed across different market cycles. Understand costs: Examine expense ratios, exit loads, and any hidden charges. Read the fund factsheet and prospectus: Go beyond marketing material to understand the fund's objectives, asset mix, and rebalancing policy. This helps ensure the fund truly matches your financial needs and expectations, says Punj of Equirus. Multi asset funds and taxes Multi-asset mutual funds in India are taxed based on their equity exposure. If the fund holds 65% or more in domestic equities, it is treated as an equity fund, attracting 15% short-term capital gains tax (if held <1 year) and 10% long-term capital gains tax (if held >1 year, gains above ₹1 lakh). If equity exposure is less than 65%, it is taxed like a debt fund, with gains taxed at the investor's slab rate. Exit loads may apply if units are redeemed within a specified period, typically 1% for redemptions within 1 year.