2 Rules of Investing : Rule 1 - Never Lose Capital, Rule 2 - Never Forget Rule No 1, Period.

In today’s dynamic market environment, relying on a single asset class can expose portfolios to unpredictability and risk. Single-asset approaches have long been a staple in investment portfolios, but the evolving financial landscape increasingly highlights the need for incorporating multi-asset investing.

Multi-asset investment approach offers a solution by combining various asset classes - such as equities, debt and gold - into a single cohesive portfolio.

Stock markets face fluctuations influenced by global and domestic factors. Economic and policy analysts anticipate that the US Federal Reserve, (RBI generally follows up..), may begin a rate-cut cycle from this month. Historically, such rate-cut cycles have had mixed results on equity markets.

It’s important to be mindful that market cycles are an inevitable part of investing. Whether it is the bull market’s euphoria or the bear market’s gloom, these cycles are a reminder that market fluctuations are part of the investment journey.

While market fluctuations may be disconcerting, they are a natural aspect of investing and present both challenges and opportunities. To overcome market uncertainties, a strategic and calibrated approach to investing may be adapted.

The Multi-Asset Approach - A Solution ?

In times of uncertainty, having a multi-asset approach becomes essential as it offers exposure to multiple asset classes, each moving through its own cycles.

Historically, different asset classes have succeeded in different years: equities during strong market run, bonds during periods of uncertainty, and gold during market turmoil. Because these asset classes move through their own cycles, their peaks and troughs rarely align.

Lower Drawdown with a Multi-Asset Approach -

When it comes to investing, equities might be a long term approach to create wealth over time and beat inflation. But equity investments also have drawdowns. Drawdown can be defined as a decline in value from a stock’s maximum point up to its lowest point before recovering.

As a matter of fact, markets move in cycles, so no asset class always wins. When equities underperform, debt and gold often step in to provide stability and support the portfolio.

Therefore, a well-diversified strategy that includes a mix of equities, stable debt, and gold allocation. Which can achieve comparable returns with controlled fluctuations than a pure equity approach.

In general, multi-asset approaches (like combining equity, debt, and gold) tend to have lower drawdowns compared to pure equity investments. Thus, it reduces the portfolio’s overall risk and enhances the returns.

Another important point to note is that different asset classes in a multi-asset approach, - when one asset class is not performing well, the others may perform better, which helps in reducing the overall impact of underperformance of one asset class.

Thus, the benefits of a diversified approach become particularly evident during periods of market fluctuations, as when equities face fluctuations, bonds or gold can offer a stabilizing effect.

The main reason for using a diversified strategy is that it is nearly impossible to predict which asset class can perform better next or to help time the market, especially since the economic landscape is always changing. Instead, a good asset allocation approach helps avoid trying to time the market and keeps investment portfolios well-checked.

Analyzing, making investment decisions, and regularly rebalancing can be cumbersome. A Readymade Solution like the Multi-Asset Fund of Funds could be an option.

Despite equities being the most preferred asset class, it is equally important to understand the advantages of other asset types. There is a season for each of the asset classes to be utilised, hence ensuring that there is stability and growth in a well-diversified portfolio. By rationally participating in a variety of asset classes according to risk profiles, the advantages of a balanced Multi Asset Investing strategy can come forward.

Contact us at Arrow Investments to know more about Multi Asset Funds and how they can be a solid rock in your portfolio construct and valuation. ( Mob:9844406003)

Best wishes. Always remember :- Your Life is not about making Money, Your Money is about making your Life.

Happy Investing.??

Nilesh Narendra Shah.