In today’s world, where market uncertainties and interest rate fluctuations prevail, finding an investment avenue that offers a balance between risk and reward is important for investors. This is where multi asset allocation funds come into play, offering a strategic approach to investment that aims to optimize returns while managing risks effectively.
Bajaj Finserv Mutual Fund has recently launched its multi asset allocation fund designed to cater to the needs of conservative investors who seek relatively steady returns in long term amidst market fluctuations. Let’s understand how this fund balances risk and reward through its unique investment strategies.
Equity allocation strategy:
One of the key components of the multi asset allocation fund’s strategy is its approach to equity allocation. The fund focuses on selecting companies with strong dividend growth, stability, and sustainable payouts. By aiming for an average dividend yield higher than that of the Nifty 50 index, the fund seeks to obtain steady income stream for investors. Additionally, dividends are reinvested to utilize the power of compounding returns, further contributing to long-term wealth creation.
Debt allocation strategy:
The debt allocation strategy of the multi asset allocation fund is designed to utilize opportunities across interest rate cycles while managing associated risks effectively. By adopting a short to medium-term investment horizon, the fund capitalizes on yields available in the debt market.
During periods of interest rate hikes, the fund strategically locks in higher yields, thereby optimizing income flow for investors. This proactive approach shields the portfolio from the adverse impact of rising interest rates, which typically lead to bond price depreciation. Instead, investors benefit from stable or increasing income streams, contributing to overall portfolio resilience.
Conversely, during interest rate cuts, the fund’s performance is maintained by better mark-to-market gains. As interest rates decline, bond prices tend to rise, resulting in capital appreciation. The fund capitalizes on this favourable market dynamics, enhancing returns and mitigating downside risks associated with falling interest rates.
By actively managing debt allocations based on interest rate expectations and market conditions, the multi asset allocation fund seeks to optimize returns while safeguarding investors’ capital against interest rate fluctuations. This dynamic approach adds a layer of stability to the portfolio, complementing the equity and gold components to achieve balanced risk-adjusted returns.
Investment in gold for diversification:
Gold allocation within the multi asset allocation fund serves multiple purposes beyond traditional portfolio diversification. While gold is renowned as a stable asset during times of uncertainty, its role extends beyond crisis hedging to encompass long-term wealth preservation and growth.
Inflation hedge: Gold serves as an effective hedge against inflation, maintaining investors’ purchasing power in the face of rising prices. Unlike currencies, which may depreciate over time due to inflationary pressures, gold maintains its intrinsic value, making it an attractive asset during inflationary periods.
Stable asset: During times of geopolitical tensions or market volatility, gold often emerges as a stable asset, offering stability and liquidity when other investment avenues exhibit heightened uncertainty.
Potential growth opportunity: While gold is commonly perceived as a defensive asset, it also presents potential growth opportunities over the long term. Demand for gold remains robust across various sectors, including jewellery, technology, and central bank reserves, sustaining its intrinsic value and long-term appreciation potential.
Currency hedge: In an increasingly interconnected global economy, currency fluctuations can impact investment returns and portfolio stability. Gold serves as a hedge against currency depreciation, providing investors with a safeguard against adverse movements in fiat currencies.
Portfolio diversification: Beyond its risk mitigation properties, gold enhances portfolio diversification by offering low correlation with other asset classes such as stocks and bonds. By including gold within the multi asset allocation fund, investors benefit from a well-rounded portfolio that can weather diverse market conditions while optimizing risk-adjusted returns in long term.
This multi asset allocation fund is particularly suitable for investors who prioritize low volatility in their investment journey and seek professional asset allocation expertise. It caters to those aiming to achieve potential returns in the long term while minimizing downside risks. Additionally, it serves as an ideal option for investors venturing into equity for the first time, offering a balanced approach to wealth creation.
In conclusion, Bajaj Finserv Multi Asset Allocation Fund presents a suitable solution for investors looking to balance risk and reward in their investment portfolios. By incorporating strategic equity, debt, and gold allocations, the fund aims to deliver steady returns in long term while navigating through market uncertainties, making it a prudent choice for conservative investors seeking stability and growth. You can consider investing in this scheme through SIP or lumpsum mode, based on your preference.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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