DSP Multi Asset Allocation Fund: Main Objective & How can one invest?

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By Bhargab Kaushik

DSP Mutual Fund reports the launch of the DSP Multi Asset Allocation Fund. The plan’s public subscription period started on September 7 and will finish on September 21 of the following year, 2023. According to DSP Mutual Fund House, between 35 and 80% of its investments may be put in stocks, with up to 50% allowed to be in international stocks. It may also invest up to 10% in REITs and InvITs, 10-50% in debt, 0-20% in other commodities through ETFs & ETCDs, and 10-50% in gold ETF.

DSP Multi Asset Allocation Fund: Main Objective & How can one invest?

DSP Multi Asset Allocation Fund

DSP Mutual Fund recently announced the DSP Multi Asset Allocation Fund (DSP MAAF), an open-ended approach that aims to deliver investors long-term returns comparable to what stocks may give but with improved resilience against market dips. By assisting investors in diversifying their holdings across a number of asset classes, including as domestic and international stocks, debt instruments, gold ETFs, other commodities, ETFs, and exchange-traded commodity derivatives (ETCDs), DSP MAAF aims to reduce overall risk for investors.

When distributing assets via DSP MAAF, the long-term expected returns from multiple asset classes, their actual volatility, and the correlation between each asset class will all be taken into account. The fundamental idea is that by adding assets with low correlation to a portfolio, another asset class may perform well even if one asset class is having a bad day, hence improving the investment experience. The historical returns of a multi-asset model portfolio have also demonstrated returns equivalent to domestic stock returns with substantially lower volatility than equities.

Main Objectives of the DSP Multi Asset Allocation Fund

The investment goal of the Scheme is to generate long-term capital growth through a range of asset classes, including foreign securities, debt and money market instruments, commodities ETFs, and exchange-traded commodity derivatives. However, there is no assurance that the investing objective of the scheme will materialize. Time is the most overlooked component of investing, claims Kalpen Parekh, MD & CEO of DSP Mutual Fund. 

Therefore, our goal is to suggest a strategy that reduces volatility by increasing the variety of asset classes. Our multi-asset fund combines Indian equities with foreign stocks, bonds, and precious metals, allowing investors to gain from each asset class’s cycles and ultimately stay invested in the fund longer due to fewer fluctuations than they would with a single asset class.

How can one invest in a DSP Multi Asset Allocation Fund?

  • $100 per plan or option is the minimum investment needed to take part in the program, while multiples of Re 1 are also acceptable. There is no cap on the maximum investment amount.
  • The equity investments of DSP MAAF may contain up to 50% foreign securities. 35 to 80% of its investments are in stock. 
  • It may also invest up to 10% in REITs and InvITs, 10% to 50% in debt, 10% to 50% in gold exchange-traded funds (ETFs), 0 to 20% in other commodities through ETFs & ETCDs, and up to 50% in gold ETF.

How will the scheme benchmark its performance?

The performance of the plan will be evaluated in relation to the following benchmarks: 40% NIFTY500 TRI, 20% NIFTY Composite Debt Index, 15% domestic gold spot prices (based on LBMA gold daily spot fixing prices), 5% iCOMDEX Composite Index, and 20% MSCI World Index.

Investors do not have to pay anything to park their gains in this plan because there is no “Entry Load” associated with it. The “Exit Load” charged would likewise be “Nil”.

Who will manage this scheme?

Aparna Karnik and Prateek Nigudkar will oversee the fund managers for the scheme’s equity investments, Sandeep Yadav will oversee the fund managers for the scheme’s debt investments, Jay Kothari will oversee the fund managers for the scheme’s international investments, and Ravi Gehani will oversee the fund managers for the scheme’s commodities investments.

Does the fund contain any inherent risk?

The plan comprises “Very High Risk” and is best suited for investors who understand that their cash will only be exposed to extremely high risk, according to the information in the plan information paper. Investors should consult their financial advisors if they have any concerns about whether the product is the correct choice for them.

DSP Multi Asset Allocation Fund Key things to know

  • Long-term investors will also benefit from indexation as it comes to capital gains taxes and as it pertains to debt programs.
  • When considering committing a minimum of three years to such a fund, historical data demonstrates that, after accounting for the benefit of indexation, debt or equity taxation has no appreciable impact on the investor’s net returns.

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