If you are just about to start your investing journey and you are considering a multi-asset allocation fund as your first investment, then let me stop you there because it could be a mistake. Let me tell you how.
When you invest in a multi-asset allocation fund, the fund manager decides how much to put into equity, how much to put into debt, and how much to put into gold, silver, and other things, right? But all you see is a single NAV. So you do not get to observe how volatile each of these assets are independently of each other. You do not get to see how when equities fall by 20-30%, your gold comes to rescue, or how when gold goes nowhere for 2, 3, 5 years, your equities deliver the returns that it needed. And how across all the scenarios, the debt offers much-needed stability to your portfolio.
And why is this important? Because in investing, learnings only come from experience. And if you don’t have the experience, and when you have after 10 years, 15 years, large sums of money to invest, you will have no idea how much to allocate to equities, how much to allocate to gold, and how much to allocate to debt. And you will have no idea of what your actual risk appetite is—how much fall in the money you can handle.
There is also a second point where multi-asset allocation fund is a bad idea that I will share in my subsequent post.
About Prathamesh
I am an IIM Bangalore alumnus. I was wealth manager for some of the riches HNI-UHNI families in India. Then I decided to venture out on my own to bring that expertise for everyday Indians. I am working to make highest-grade investment advisory accessible to every Indian. IMO the lesser the welath someone has, the more they can benefit from professional guidance. I like to write and talk about everything finace - investing, insurance, debt management, behavioral finance and so on. When I am not writing, I am making educational videos. And when I am not doing that either, I am catching up with the lates comedy or thriller shows and movies.
