DSP Mutual Fund will open subscriptions to its DSP Multi Asset Allocation Fund (DSP MAAF), an open-ended scheme aiming for long-term returns, on Thursday.
The scheme aims to provide investors with added resilience against market falls by diversifying investments into domestic and international stocks, debt instruments, commodities, gold ETFs, exchange-traded commodity derivatives (ETCDs), etc.
In a press release explaining its features, Kalpen Parekh, MD & CEO of DSP MF, said, “The most underrated factor in investing is time. Once investors devote time, compounding follows. However, temporary price fluctuations distract most of us from staying invested. Hence, we want to offer a solution which reduces fluctuations by increasing the asset classes.
“Our multi-asset fund adds global stocks, precious metals & bonds and Indian equities, enabling investors to take advantage of cycles of each of these and eventually stay invested in the fund for longer due to lower fluctuations.”
“Historical data has repeatedly shown that the best-performing asset class can vary significantly over the years, making it difficult to predict the winner each year,” DSP said.
The scheme plans to allocate assets based on three factors: long-term expected returns from different asset classes, volatility and the correlation among each asset class.
The idea, it said, is that when assets with low correlation among one another are added to a portfolio, even if one asset class faces a downturn, another one might perform well, potentially smoothening out the investor experience.
DSP MAAF can invest between 35-80 per cent in equities, of which up to 50 per cent can be in international equities.
It can also invest 10-50 per cent in debt, 10-50 per cent in Gold ETF, 0-20 per cent in other commodities through ETFs & ETCDs and up to 10 per cent in REITs & InvITs.
Besides, long-term investors will get indexation benefits on capital gains taxation, as applicable to debt schemes. Historical data indicates that if investors consider a minimum three-year allocation to such a fund, debt or equity tax does not cause any material difference in the net returns in the hands of the investor after considering the indexation benefit.
For positive outcomes, one is required to survive first, which is tough, given how most investors react when the market peaks by investing more or when the market goes down, they end up exiting, it said. So, investors seeking to build a robust portfolio need a blend of diverse asset classes to help them stand firm against these market fluctuations.
