Avoiding Common Pitfalls through Asset Allocation and Multi-Asset Investing

Just as you track the calories and nutrients for a well-balanced diet, you need a balanced portfolio that has multiple assets to balance the risks and returns.

- CSP SHUKLA, ABHISHEK KUMAR, ANKUR SHARMA

A multi-asset strategy is a mathematically smart way of investing. It spreads investment risk across several uncorrelated assets to smoothen out portfolio volatility and limit downside risk. This strategy aims to buy underperforming asset classes and sell outperforming asset classes, effectively buying things cheap and selling them at a premium, which is return accretive in the long run.

But multi-asset investing is as much about psychology as it is about maths. We, humans, are irrational creatures with emotional and cognitive biases that can often come in the way of prudent asset allocation decisions. Some of these are:

Bias to take action