The Importance of Multi-Asset Allocation in Diversified Investment Strategies

Learn how diversifying investments across asset classes balances risk and enhances long-term returns.

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Diversification is one of the fundamental principles of investment strategy. The adage "Don't put all your eggs in one basket" has stood the test of time — it helps to spread risk and increase the potential for long-term returns.

Investors are concerned with accumulating and maintaining the wealth needed to meet their needs and aspirations. In that endeavor, Asset Allocation plays a very important role. In the context of investment, asset allocation helps in achieving diversification through multi-asset allocation, which involves spreading investments across different asset classes such as equities, fixed income, commodities (like gold and silver), and Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Multi-Asset Allocation Strategy: A Holistic Approach

An investor can gain exposure to these asset classes through multiple funds or by using a single fund that implements a strategic asset allocation approach. A strategic asset allocation strategy sets the framework for long-term investment based on an investor's risk tolerance, financial objectives, and time horizon. The main advantage of a strategic asset allocation is that it emphasizes long-term growth and stability, reducing the need for frequent adjustments or rebalancing.