Investors who want to take low risk and higher returns by persistent investing approach can take full advantage of this asset class. But, those investors who understand asset allocation and base their investment decisions on it are not likely to benefit much than the former group.
Asset allocation is the most important factor determining a portfolio’s performance. Studies show that 94% of the portfolio’s returns variance is determined by how funds are spread across asset classes. Only a small portion is determined by market timing and security selection.
If you are an investor with a large investment corpus, then between you and your financial advisor, taking a call on asset allocation will be a favorable option.
Investors holding multi cap fund in their portfolio are not much risk takers. It is said that in order to benefit from the market conditions, it is important to take risk. But risking once financial position to such an extent that it leads to borrowing a home loan or personal loan to fulfill financial obligations should not be the last resort.
To avoid all these problems in the future, holding a midcap fund is what is advised. Although most fund managers are not willing to take large amounts of risk, they prefer to invest in large cap funds, because of the ability to exit quickly and the low redemption pressure they carry. But, most multi cap fund holders are reluctant to care about that factor as they believe that multi cap funds been more aggressive, the superior returns generated by multi-cap funds belie these allegations. Besides, a rise in the ratio of small-caps in the overall allocation can augment the fund’s inherent risk.
Although, the benefits and disadvantages are being debated, it is important to realize that, these multi cap funds are new in the market and have just gone through one business cycle. Depending on further performances, their stand can be judged.
Although, the benefits and disadvantages are being debated, it is important to realize that, these multi cap funds are new in the market and have just gone through one business cycle. Depending on further performances, their stand can be judged.