Why should DIY investors consider investing in passive multi-asset funds?

Passive investing allows you to participate in the growth of the market without worrying about the variables, making it a win-win solution for DIY investors.   

The Do It Yourself or DIY investment approach is the new trend, and we have deep-seated FOMO not to try it. 

The typical approach is – After all, isn’t it all about investing in equities and a few more asset classes, how difficult can it be? 

However, experts say with the passage of time, it soon becomes apparent that juggling profitably between various asset classes is no easy task. 

Passive Multi-Asset Fund

Industry experts say passive investing is one of the best options for investors who do not wish to get caught up in the ebbs and flows of the market. 

Now, Chintan Haria, Head – Product Development and Strategy, ICICI Prudential AMC, says, “considering the first tenet of investment, which is diversification or asset allocation, a DIY investor can consider a passively managed multi-asset approach.” 

Not only does it help you diversify across asset classes, but also it protects your portfolio from volatility in individual asset classes. So, if you are looking for an ideal solution for multiple problems like selection, sizing, timing, and taxation, experts say, a passive multi-asset fund can be an optimal solution.   

“Passive funds track the underlying index or basket of securities and aim to generate returns in line with the market. Considering that the main aim of these funds is to replicate the index, they tend to witness minimal churn,” adds Haria. 

Further, the fund manager does not need to actively manage the portfolio. Due to these two factors, the management fee charged by passive funds is usually relatively lower. 

Passive investing allows you to participate in the growth of the market without worrying about the variables, making it a win-win solution for DIY investors.   

For instance, the ICICI Prudential Multi-Asset Fund of Funds, which allocates 25 per cent to 65 per cent to domestic Equity ETFs and Index Funds, 25 per cent-65 per cent to Debt ETFs and Index Funds, 0 per cent-15 per cent to Gold ETFs and 10 per cent-30 per cent to Global Equity ETFs. Given its allocation to varied asset classes, experts say, the scheme offers optimal diversification and exposure to international equities, there is also an element of geographical diversification. 

Haria explains, “Within domestic equities, the fund manager here has the flexibility to choose sectors/themes and allocate between large, mid or small-cap in order to generate alpha. With no tax impact on re-balancing and professional expertise for investing in domestic and global markets, the scheme emerges as a one-stop low-cost investment solution.” 

He further adds, “Despite the scheme being passive in nature, the allocation to the various asset classes is actively managed to make it a win-win for investors, all of it leading to better risk-adjusted returns.” 

To conclude, experts say passive multi-asset funds offer the ease of DIY investing while getting the benefit of expert fund managers optimising the portfolio for positive investment outcomes at all times.