Experts: Diversify Across Assets, Don't Chase Winners
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- Harshad Patwardhan, chief investment officer at Union Asset Management Company, said asset allocation is the first key step in investment, with predicting which asset class will perform best made difficult by macroeconomic, geopolitical and fund-flow influences — and noted potential tax and transaction costs of switching between asset classes.
- Sanjay Bembalkar, head of equity at Union AMC, classified equity and debt as "efficiency assets" linked to underlying cash flows, while gold and silver are "scarcity assets" driven by demand and supply — a distinction that can produce lower or negative correlations between asset classes at different points in the cycle.
- Indian equities have remained volatile amid global macroeconomic and geopolitical uncertainties, while gold and silver have seen corrections after strong runs and debt has offered relatively steadier but moderate returns.
- Multi-asset allocation funds do not eliminate downside risk — Bembalkar warned that correlations between asset classes can shift during periods of market stress and such funds can experience volatility in extreme conditions.
- Diversification offers a behavioral benefit by reducing the tendency to chase whichever asset class is currently outperforming or fear of missing out, while a multi-asset fund allows investors to outsource allocation and rebalancing decisions to a manager who adjusts as conditions change.
- Patwardhan said the strategy is best suited to a long-term horizon and can serve as a core portfolio category, but investors with short-term liquidity needs should maintain appropriate allocations to instruments suited to those needs rather than relying on multi-asset funds for near-term cash requirements.
Why it matters: For Indian retail investors navigating simultaneous volatility in equities, corrections in precious metals and moderate debt returns, the practical value of multi-asset allocation lies not in guaranteed downside protection — Bembalkar explicitly noted correlations shift and volatility persists in stress periods — but in outsourcing rebalancing discipline and reducing the behavioral impulse to chase winners.
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