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Mutual funds, both actively and passively managed, aim at generating capital appreciation. The investment objective of a mutual fund scheme is to outperform its underlying index through buying or selling certain securities. Mutual funds invest across various asset classes and money market instruments for income generation. These are a pool of professionally managed funds that invest in both international as well as domestic securities as well as in money market instruments like commercial papers, G-sec, corporate bonds, company fixed deposits, etc.
Mutual funds are managed by an elite team of analysts, market research experts and fund managers who through an applied investment strategy focus on helping the scheme achieve its investment objective. Currently there are end number of mutual fund schemes for investors to choose from. However, investors should make a financial plan through which they must prioritize their life’s short term and long term financial goals and target these goals by making lucrative investments. Mutual funds are further categorized based on certain unique attributes like risk portfolio, investment strategy, asset allocation, investment objective etc. Equity, debt, solution oriented, index, ETF, gold, FoFs, hybrid etc.
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What is hybrid mutual funds?
Hybrid schemes are open ended mutual fund schemes which invest in both equity and debt for income generation. Whether a hybrid fund will allocate majority of its assets to equity or debt will entirely depend on the scheme’s nature, risk profile and investment objective. Investors looking to diversify their mutual fund portfolio with a hybrid scheme that invests in more than one asset class can consider investing in multi asset allocation funds.
What are multi asset allocation funds?
As per market regular SEBI guidelines, a multi asset allocation fund must allocation a minimum of 10 percent in any three asset class like equity, debt, and gold. The investment objective of a multi asset allocation fund is to earn capital appreciation over the long term by investing in more than one asset class. Equity as an asset class is known to have a high risk returns ratio. Debt instruments provide cushion against falling equity markets. And gold as an asset has a reputation for donning as a hedge against falling markets.
Benefit from multiple asset classes and target your long term goals
Very rarely do we come across an investment scheme which lets to take advantage of three different asset classes through a single investment. By investing in a multi asset allocation fund you get that option as investors get to benefit from three asset classes. To generation long term capital appreciation from mutual fund investments, diversification is the key. A well-diversified portfolio ensures that you do not have securities belonging to just one asset classes and might even help even out losses accrued from any of the asset classes. That’s because it is less likely for all asset classes to perform all in tandem at the same time.
SIP or lumpsum? How do you wish to invest in a multi asset allocation fund?
If you wish to diversify your mutual fund portfolio with a multi asset scheme, you should be aware that you can either make a onetime lumpsum investment or start a monthly SIP in this scheme. A lumpsum investment is usually made at the beginning of the investment cycle. A Systematic Investment Plan on the other hand ensures that you continue to save and invest a fixed amount at regular intervals. Investors can also refer to SIP calculator, a free online tool that lets you determine how much corpus you will accumulate with your current SIP investments over a postulated period of time.
If you are new to mutual funds, please consult a financial advisor before investing.
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