Multi-Asset

Composed of varying asset classes, multi-asset is a blanket designation combining different classes such bonds, equities, cash equivalents, fixed income, and alternative investments.

When compared to traditional balanced funds, multi-asset solutions differ because they target specific investment outcomes.

This includes outcomes such as return above inflation as opposed to gauging performance against standardized benchmarks.

Given the composition of multi-asset classes, they need to be dynamically managed so that funds can continue to generate returns while keeping risk within fixed parameters.

What Are Advantages or Disadvantages to Multi-Asset Investments?

While multi-asset investing may better distribute risk, it should be known that a hindrance may be exerted upon potential returns.

Indeed, multi-asset classes do not always perform as well as most stock funds due to containing other assets such as cash, bonds, or real estate investments.

As a result, traders generally tend to gravitate towards target-date mutual funds, target allocation mutual funds, and ETFs.

Multi-asset funds that fluctuate with an investor’s time scope are target-date mutual funds.

Generally, target-date mutual funds run in congruence with an investor’s retirement age and are composed primarily of equities (85% to 90%) while the remaining is distributed to a money market or fixed income.

Target allocation mutual funds are centered around an investor’s risk tolerance and are offered by most mutual fund companies.

Equities compose between 20% to 85% of multi-asset funds and may also include international equities and bonds.

Trading ETFs through contracts-for-difference (CFD) trading provides traders with a more immediate avenue to multi-asset investing with financial instruments such as precious metals, commodities, and currencies.

The diversification that stems from the wake of multi-asset investing helps protect traders against unforeseen market pitfalls and volatility.

However, these tend not to perform as effectively as the majority of stock funds in common years due to an allocation of assets.