Mitigate Your Downside Risk With a Simple Multi Asset Allocation Strategy

Posted On Tuesday, Feb 23, 2021

As per the recent RBI data, the year-on-year growth in Bank Deposits was seen at 11.5%. This shows that savers (not investors) are still opting for the traditional ways to ‘park’ their money. Yes, simply ‘park’ their money without realizing that in the long-run, the value of money kept in deposits could be much less than when it was earned, thanks to inflation. Ever rising inflation coupled with low interest rates eats into your earnings. FD rates for most of the banks are in the 3-6% range.1 Bank deposits** limit the potential of your money to accommodate for the rising cost of living.

The following illustration is to explain how equity investments have potential to help in coping with inflation. On average, cost of consumption grows at a CAGR of approx. 4%. If you solely invest in bank deposits, you fall relatively short of meeting the rising expenses.

Consumer Basket20162021CAGR
BSE SENSEX149.69296.7714.74%
SBI 1 year Deposit135.34186.886.66%
CPI Index130.3154.23.84%

Considered 100 as base
Time frame is Jan 2016 to Jan 2021
Data updated as on Jan 29, 2021
CPI Index Source: RBI
Past Performance may or may not sustained in future.

On the other hand, the returns from equities outperform the rate of inflation in long term. However, equity investments are subject to market uncertainty.


Source: Bloomberg as on Dec 2020
Past Performance may or may not sustained in future

Imagine someone holding an all equity portfolio in 2008 or early 2020, or holding none in the equity rally that followed?

You do not want to miss out on gains from equities and at the same time forgo the safety of bank deposits.

What should YOU do?

Lookout for a market based alternative instead.

When it comes to mutual funds, you can invest your money for long-term in funds that rightfully balance safety and returns in your investment portfolio. While prudent asset allocation is one way to diversify market uncertainty, we need to understand that asset allocation is not static. Another solution that may be easier is to choose investing in just one fund - a Multi-Asset Fund of Funds. This Fund diversifies your money across asset classes such as equity, debt and gold depending on market conditions while aiming to generate long-term risk adjusted returns.

Balance risk with returns by investing in the Quantum Multi-Asset Fund of Funds


Consider investing in Quantum Multi Asset Fund of Funds (QMAFOF) that offers the periodic rebalancing of risk through asset allocation. Although returns and principal in QMAFOF are not guaranteed and insured like a fixed deposit, it has given returns similar to Bank Fixed Deposits over the long term in past**. Due to the equity component, it is likely to generate market linked returns. So over the long-term, you are better positioned potentially to earn returns greater than the prevailing rate of inflation.

Given the falling FD rates, you can consider option to invest in QMAFOF, if you are ready with such investments subject to market risks.

Risk adjusted returns across market cycles

It’s imperative for you to understand the significance of prudent investing. Invest in instruments that will allow you to make the most of your money. Traditional ways of investing are fine, but identifying & exploring newer ways for investments could help you get long term risk adjusted returns.

Launched in July 2012, over the years QMAFOF has successfully delivered risk-adjusted returns. The fund has stood the test of time with long term performance across market cycles.

Performance of the SchemeDirect Plan - Growth Option
Quantum Multi Asset Fund of Funds - Direct Plan - Growth Option
 Current Value ₹10,000 Invested at the beginning of a given period
PeriodScheme Returns
(%)
Benchmark Returns
(%)#
Scheme
(₹)
Benchmark Returns
(₹)#
Since Inception
(11th Jul 2012)
9.55%10.78%21,82724,027
Jan 31, 2014 to Jan 29, 2021 (7 years)9.88%11.63%19,34321,596
Jan 29, 2016 to Jan 29, 2021 (5 years)9.82%12.60%15,98118,114
Jan 31, 2018 to Jan 29, 2021 (3 years)8.01%12.12%12,59914,091
Jan 31, 2020 to Jan 29, 2021 (1 year)12.75%16.16%11,27111,612

Past performance may or may not be sustained in the future. Load is not taken into consideration in scheme returns calculation. Data as of Jan 31, 2021
Different Plans shall have a different expense structure.
Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR).
#Indicates CRISIL Composite Bond Fund Index (40%) + S&P BSE SENSEX Total Return Index (40%) + Domestic price of Gold (20%). It is a customized
index and it is rebalanced daily.

The fund is managed by Mr. Chirag Mehta and Mr. Nilesh Shetty.
For performance of other Schemes managed by them please click here.

Ignore timing markets, leave asset allocation to us

The fund managers of QMAFOF strategically positions the portfolio depending on the prevailing market conditions, thus allowing you to ignore the need to time the market. The fund has a broad and flexible mandate by which the funds can dynamically allocate anywhere between 25%-65% of the portfolio to equity or debt and 10% - 20% to gold.

Better risk-reward opportunity with long-term investing

Typically we see that investors invest in small tenure FDs (1-3 years) and keep rolling them over. But if your horizon is 3 years or more, you have an option to a fixed deposit by taking some risks i.e. equity allocation via the QMAFOF. In effect, your investment can generate higher return for the risk you take, depending on the market conditions.

Navigate through uncertainty in equity markets

Even in the most conservative investment portfolio, it is suggested to allocate a portion of assets to equities to diversify your portfolio from inflation risks. Currently there might be a little uncertainty around equity markets, but that’s the very nature of this asset class. A simple solution to that is to invest for long-term and repose faith in India’s growth story. Investment in equity via mutual funds needs time to climb up and for returns to compound over a long period. So if you are one of those investors who are not sure what should be your ideal equity allocation, then you can gradually start off with QMAFOF and give your money the potential to grow with some equity exposure. The unique combination of QMAFOF portfolio brings together the equity assets with other relatively less volatile asset classes in the portfolio. The negative correlation between these asset classes & regularly rebalancing your portfolio will diversify your investment by minimizing the impact of losses driven by collapsing markets. With QMAFOF both asset allocation and asset rebalancing are taken care of.


Time frame is Jan 2016 to Jan 2021
Data updated as on Jan 29, 2021
Equity represents Sensex returns,
The above table is for explanation purpose only. Past Performance may or may not sustained in future

Key Takeaways:

• Rather than opting for traditional saving instruments like FDs, opt for QMAFOF to cope better with inflation by taking some market risks.

• The Equity component in QMAFOF can generate market linked returns.

• QMAFOF can be an option for investors who park their money in long term FDs (3 years and above).

• Diversification in different asset classes aims at reducing uncertainty of returns.

• The fund follows a dynamic portfolio allocation technique. Thus no need to time the market. Invest in peace!

Start balancing Risk with Diversification. Start investing in Quantum Multi Asset Fund of Funds.


1Hindu business Line February - Latest Fixed Deposit Interest Rates

**Note: The comparison with Fixed Deposits has been given for the purpose of the general information only and not a recommendation to invest. Investments in Quantum Multi Asset Fund of Funds / mutual funds should not be construed as a promise, guarantee on or a forecast of any minimum returns. Unlike fixed deposit with Banks there is no capital protection guarantee or assurance of any return in Quantum Multi Asset Fund of Funds / mutual funds investment. Investment in Quantum Multi Asset Fund of Funds as compared to Fixed Deposits carry moderately high risk, different tax treatment and subject to market risk and any investment decision needs to be taken only after consulting the Tax Consultant or Financial Advisor.


Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Multi Asset Fund of Funds

An Open Ended Fund of Funds Scheme Investing in schemes of Quantum Mutual Fund
• Long term capital appreciation and current income

• Investments in portfolio of schemes of Quantum Mutual Fund whose underlying investments are in equity , debt / money market instruments and gold
Quantum Gold Fund
Investors understand that their principal will be at Moderately High Risk
Quantum India ESG Equity Fund

An Open ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme
• Long term capital appreciation

• Invests in shares of companies that meet Quantum's Environment, Social, Governance (ESG) criteria.
Quantum Gold Fund
Investors understand that their principal will be at Very High Risk
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in the Risk O Meter is based on the portfolio of the scheme as on January 31, 2021.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumAMC.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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