This is why it's beneficial to have a Multi-asset fund in your portfolio

Read in: 3mins, Published On , 28 Sep 2021

Diversification is the holy grail of investing. When it comes to growing your money, putting your eggs in different baskets may help you, achieve your financial goals. Multi-asset funds lets you do just that. 

 

What Are Multi-Asset Funds?

 

Multi-asset funds are mutual funds that invest in different asset classes. As per SEBI regulation multi-asset funds to invest at least 10% in three different asset classes. In India, most multi-asset funds invest in domestic equities, debt and gold. While there may be some funds that invest in international equities as well. 

 

Why Invest in Multi-Asset Funds?

 

The apparent benefit of multi-asset funds is diversification:

 

· Investing in different asset classes may reduce the risk exposure. This means that the highly volatile of an asset class like equities is balanced with debt and gold exposure providing stable returns over time.

 

Apart from diversification benefits, multi-asset funds also:

 

· Provide a ready-made diversified investment portfolio managed by a fund manager, thereby reducing your need to monitor market movements on a daily basis.

· Provide diversification within asset classes via exposure to different company sizes, sectors, geographies or currencies. 

 

Multi-asset funds have the ability to generate potential  returns while reducing risk exposure, thereby providing a well-balanced investment portfolio. 

 

What About Taxation in Multi-Asset Funds?

 

Any returns that you make from investments in multi-asset funds are subject to capital gains tax. Depending on asset allocation, multi-asset funds may be treated as equity-oriented funds or debt-oriented funds for tax purposes. 

 

According to SEBI, any mutual fund that invests at least 65% in domestic equities is an equity-oriented fund. If a multi-asset fund meets this criterion, tax implications are as follows:

 

· For investments held less than 12 months, short-term capital gains tax (STGC) is applicable at 15% plus applicable cess and surcharge, if any.

· For investments held longer than 12 months, long-term capital gains (LTGC) tax is levied at 10%, however, one would get an exemption on LTGC up to Rs. 1,00,000/- for each year.

 

Multi-asset funds that have less than 65% exposure to equities are taxed as debt-oriented funds. 

 

· For investments held less than 36 months, gains are added to the investor’s income and taxed at their applicable income tax slab. 

· Investments held longer than 36 months attract an LTCG tax of 20% with indexation plus applicable cess and surcharge, if any. 

 

*Indexation adjusts an asset’s price according to inflation. When inflation goes up, indexation will increase the purchase price of the asset, thereby reducing overall capital gains, and hence, the tax. 

 

 

Should You Invest in Multi-Asset Funds?

 

Multi-asset funds are suitable for investors who:

 

· Want portfolio diversification via exposure to multiple asset classes 

· Have a medium to long-term investment horizon

· Looking to generate long-term wealth with marginal equity exposure 

 

 

Disclaimer –

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

This creative is under Investor Education and Awareness Initiative of UTI Mutual Fund. To know about the KYC documentary requirements and procedure for change of address, phone number, bank details, etc. please visit https://www.utimf.com/servicerequest/kyc. Please deal with only registered Mutual funds, details of which can be verified on the SEBI website under "Intermediaries/market Infrastructure Institutions". For any queries, grievance redressal investor may reach out to the respective fund house. Additionally, investor may lodge a complaint at https://scores.gov.in , a portal provided by SEBI (SEBI Complaints redress system) if not satisfied with the response given by the fund house.