Understanding the dynamics of multi-asset portfolio

Multi-asset investment strategies involve investing in various asset classes like stocks, bonds, real estate, credit, or cash to create a diversified portfolio. It is helpful in creating balanced asset classes to achieve growth.

Asset allocation, according to Brinson, Singer, and Beebower's research, accounts for 93% of portfolio return variation after security selection and market timing, making it crucial for portfolio performance.

A multi-asset portfolio involves diversifying among asset classes with low correlation, such as equity, debt, and commodities like gold. Equities offer higher returns but also volatility.

Debt investments have lower volatility but lower returns. Combining both reduces volatility and stabilizes portfolio performance. The ideal asset allocation is 80% equity and 20% debt, providing stability and 12% long-term returns.

Gold should be explored by investors with long-term commitments, limiting their contribution to 5-10% of their portfolio. Debt should be 20%, and equity should be 70-75%.

SGBs are the optimal gold investment due to asset appreciation and an additional annual interest coupon of 2.5%.

The alpha generation potential of mutual funds is explained by various categories such as conservative hybrid funds, balanced hybrid funds, aggressive hybrid funds, balanced advantage funds, dynamic asset allocation funds, and multi-asset allocation funds.

Investors can create multi-asset portfolios at personal portfolio and mutual fund levels. In a personal portfolio, investors can allocate assets based on their risk profile and investment objectives.

Over the past year, 11 NFO launches have occurred in this mutual fund category. The fund manager maintains an asset allocation ratio, with the highest return-delivering fund having the lowest debt allocation and the lowest return fund having higher debt allocation.