As the Nifty is trading at six-month lows and has touched its 200-week moving average for the first time since Covid, it is safer to consider multi-asset funds. The built-in diversification helps, and putting in money through a systematic investment plan (SIP) adds a second layer of protection by removing entry-timing risk.
In the 12 months to August 2026, multi-asset funds drew about Rs 68,500 crore, ahead of small-cap funds at Rs 62,300 crore and mid-cap funds at Rs 61,000 crore. Part of this is performance chasing, since flows rose in step with the gold rally. Over a two-year period, the average SIP returns of multi-asset funds was 8.5% against 7.6% for mid-cap funds and 4% for large-cap funds.
The real value is behavioural as a multi-asset fund’s swings are smaller than a pure equity fund. Investors are more likely to keep the SIP running through a correction. “That continuity matters more than chasing the best-returning category in any single year,” says Nirav R Karkera, head of research, W by Groww.
Asset allocation
The higher returns of multi-asset funds came mainly from asset allocation, not from stock picking. In the last two years, gold and silver delivered unusually strong gains, while equity returns were moderate and debt earned steady interest. International allocations —select funds holding 5%-12% in overseas equities and fund units —have helped, too. For Indian investors, a weakening rupee and higher import duties also raised local gold prices beyond the global rally.
Investors must weigh these funds over the long run rather than on recent performance. “A multi-asset fund is designed to steady returns across cycles, not to lead in any single one,”says Gurmeet Singh Chawla, managing director, Master Portfolio Services.
The diversification helps in reducing risks as different asset classes take different trajectories to the same macro environment. “The key is disciplined allocation and rebalancing rather than chasing the best-performing asset,” says Prashasta Seth, CEO, Prudent Investment Managers.
Will momentum persist?
Strong gold rallies are usually followed by long periods of flat or falling prices. A weaker rupee and higher import duties are one-time boosts, not repeatable sources of return. If equity, especially small-caps and mid-caps, takes the lead, the multi-asset fund’s gold and debt holdings will hold back returns. Investors should expect multi-asset returns to settle into a range between debt and equity returns over a full cycle. “These funds are best judged on smoother returns across cycles, not on matching their recent performance,” says Kush Gupta, director, SKG Investments and Advisory.
Before investing, look at the fund’s equity range and how it has moved over time, the size and composition of the commodity allocation and the rebalancing rules.