The number of asset management companies (AMCs) has increased over the years. It makes it difficult for product discrimination in equity space, as funds usually invest within the universe of 500 shares that include large-cap, mid-cap and small-cap. Therefore, it is not surprising to see AMCS making various products to woo investors. In recent times, a different product has been a multi-proclaimed fund. Here, we discuss the characteristics of such funds and if they fit in your main portfolio.
Asset all over
Property allocation is the most important step in the investment process. This refers to the share of savings you invested in asset classes to achieve life goals. The asset allocation may vary to each target, even if all the goals have the same time horizon. Why? The asset allocation is a function of the risk attitude- a more important goal, the low risk that you want to take; This means more bonds and low equity allocation. For example, asset allocation for your child’s education portfolio can be more conservative than your retirement portfolio.
A multi-asset class fund may come in contact with three asset classes-equity, bonds and commodities (usually gold and silver). You should take care of the objects in the main portfolio, as prices are inspired by global demand and supply and geopolitical issues.
In addition, such funds decide optimal allocation for each asset class based on the investment mandate. In other words, the asset allocation of the fund cannot be done in accordance with your goals or risk attitude.
conclusion
You have to make tax-skilled investments. Are multi-asset fund tax efficient? A multi-asset fund that invests more than 65% in equity is considered an equity fund.
The issue is that if you sell your fund unit after keeping them for more than 12 months, then you have to pay 12.5% long -term capital gains tax in any year, which you realize the profit. But funds keeping less than 65% in equity are considered non-equity-oriented wealth.
The capital gains generated by such funds will be added to your total income and will be taxed on your marginal tax regardless of the holding period. This is the major implications on later tax returns on your investment, as your marginal tax rate (usually 30%) will be taxed on the equity part of the fund. When you choose a multi-asset fund, you should take care of these factors.
(The author provides training programs to individuals to manage their personal investment)
Published – July 21, 2025 06:49 AM IST
