When considering an investment, you have probably heard the expression “Don’t put all your eggs in one basket.” Yes, we’ve heard it over and over. If you want to make money and avoid big losses, you have to diversify.
For many investors, diversification is the holy grail. But creating a portfolio which covers different asset classes, sectors of the economy and parts of the world can be a challenge for an individual.
How much should you have in shares or bonds? What about alternative investments, such as property, commodities or infrastructure? There are no easy answers to these questions and it all depends on your circumstances and attitude to risk.
Although diversification does not guarantee investment returns and does not eliminate the risk of loss, diversification could cushion the blow of a downturn if that investment or the sector falls.
Aside from that, a broad range of assets tends to be less volatile and help deliver the steadier, longer-term returns most investors seek. It can also provide the ability to invest in growth and income assets.
Managing a diversified portfolio
Creating a diversified portfolio come with many challenges. It is tricky to track events in different markets and understand how these affect individual investments.
On top of that, many investors simply don’t have the time, nor expertise, to manage such portfolios. A multi-asset investment vehicle is one way for investors to enjoy the benefits of diversification while keeping your investments in one place.
What is a multi-asset investment?
A multi-asset investment is an investment that consists of a mix of asset classes (such as cash, equity or bonds). A multi-asset investment contains more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes vary according to the individual investor.
With a multi-asset fund, that responsibility is taken out of your hands and put in those of professionals, who will manage the asset balance of your fund to meet a specific risk target, or manage several funds with different balances and different levels of risk. A multi- asset fund could provide you with all the diversification you require from an investment portfolio.
Taking a multi-asset approach to investment
Many mutual fund companies offer asset allocation funds that are designed to perform according to an investor’s risk tolerance. The Parala Macro Multi-Asset Funds for example, comprise 3 risk-rated multi-asset UCITS 5 funds. Drawing on a sophisticated asset allocation model, the funds are managed using ETFs (providing exposure to equities, bonds and commodities amongst others), to gain the most efficient exposure to the most appropriate asset classes at any given point in the economic cycle.
The asset allocation or spread of the investments is adjusted on a monthly basis to ensure that as economic conditions change, so does your investment portfolio, so as to not only generate returns, but also to manage emergent risks.
Reasons to consider Multi-Assets Funds:
- Global Diversification: You will gain exposure to a globally diverse mix of asset classes in order to generate returns commensurate with the level of risk
- Consistency in Process: Investing is an emotional business, and therefore the approach relies on an objective, academically verified, disciplined and consistent approach to investing
- Dynamic Risk Management: As economic conditions change, so does the asset mix within the Funds
- Active + Passive: Actively managed asset allocations are updated monthly, whilst using ETFs to minimise costs.
- Risk rated: Three different risk rated funds allow matching an unsocial investor to a specific risk reward profile.
For more information about the Multi Asset Funds, get in touch with us at info@nebafinancialsolutions.com
