{"id":6661,"date":"2025-10-24T18:41:49","date_gmt":"2025-10-24T13:11:49","guid":{"rendered":"https:\/\/1finance.co.in\/magazine\/?post_type=blog&#038;p=6661"},"modified":"2025-12-16T14:53:12","modified_gmt":"2025-12-16T09:23:12","slug":"hidden-risks-of-multi-asset-allocation-funds","status":"publish","type":"blog","link":"https:\/\/1finance.co.in\/1f-dashboard\/blog\/hidden-risks-of-multi-asset-allocation-funds\/","title":{"rendered":"Investing in multi-asset allocation funds? Don\u2019t just focus on returns, understand the risks as well"},"content":{"rendered":"<p>Lately, multi-asset allocation funds (MAAFs) have been popping up with impressive performance numbers, with many tagging them as an \u201call-in-one solution\u201d due to their diversified mix. At first glance, you may think they are beating other categories with their so-called \u201cimpressive returns\u201d, but we at <i><span style=\"font-weight: 400;\">1 Finance <\/span><\/i><span style=\"font-weight: 400;\">did some digging around those numbers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">And found ourselves questioning: <\/span><i><span style=\"font-weight: 400;\">What is really driving those returns?<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Is it the multi-asset allocation, or is there something else at play? The charts look appealing, and the messaging of \u201call-in-one solution\u201d makes them sound like a smart choice for <\/span><i><span style=\"font-weight: 400;\">\u201call kinds of investors\u201d<\/span><\/i><span style=\"font-weight: 400;\">. However, a closer look reveals something else, which raises even bigger questions:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><i><span style=\"font-weight: 400;\">Is a multi-asset allocation fund\u2019s generic asset allocation really the right fit for your goals?<\/span><\/i><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><i><span style=\"font-weight: 400;\">If goals are personalized, how can this generic mix suit all kinds of investors?<\/span><\/i><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">While we see value in what multi-asset allocation funds offer, we want you to be quite cautious about following the crowd for convenience alone. That\u2019s why, in this article, we will gain some clarity about the funds, decode the reason behind the seemingly impressive returns, and understand whether the asset mix of equities, debt, and commodities really suits your financial personality.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What are multi-asset allocation funds?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Securities and Exchange Board of India (SEBI) defines multi-asset allocation funds as a <a href=\"https:\/\/1finance.co.in\/blog\/sebis-mutual-fund-categorisation-guide-that-every-investors-should-understand\/\">type of mutual fund<\/a> that invests a minimum of 10% in at least three different asset classes like equity, debt, and commodities.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Their average asset allocation look something like this:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">~60-65% equities<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">~25-30% debt<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">~10% or more commodities (mostly gold and silver)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The remaining can be cash or real estate (if any)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The fund manager changes the ratio as per market conditions, while maintaining strictly 10% in each asset class. This asset allocation delivers diversification in one package. Hence, promising an \u201call-in-one solution\u201d hype, causing many investors to consider them. The recent returns also helped in attracting more investors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But here\u2019s what many miss: the real returns over the past year haven\u2019t come from equities at all, as many subtly suggest. So, what\u2019s really driving the performance?<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">The truth behind multi-asset allocation funds returns in 2025: It\u2019s not equities!<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">We examined the top multi-asset allocation funds by AUM size to see how scale reflects investor trust and how they performed in the last one year. Let\u2019s break it down.<\/span><\/p>\n<p><strong>Multi-asset allocation funds: AUM size &amp; returns (1Y%)<\/strong><\/p>\n<div class=\"scroll-x\">\n<table style=\"min-width: 100%; border-collapse: collapse;\">\n<thead>\n<tr>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Scheme name<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>AUM size (\u20b9 crores)<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Direct plan 1Y (%)<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Regular plan 1Y (%)<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">ICICI Pru Multi-Asset Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">64770.2<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">9.29<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">8.49<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">SBI Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">9819.38<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">8.8<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">7.84<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Kotak Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">8373.72<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">7.39<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">5.96<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Nippon India Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">6959.46<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">12.3<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">10.97<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">UTI Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">5940.72<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">4.62<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">3.36<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><em><span style=\"font-weight: 400;\">Source: 1 Finance Research, as of September 2025<\/span><\/em><\/p>\n<p>Scroll right to view full table \u2013&gt;<\/p>\n<p><span style=\"font-weight: 400;\">On the surface, these funds delivered good returns. But let\u2019s see their underlying allocation:<\/span><\/p>\n<p><strong>Multi-asset allocation funds: Asset allocation (%)<\/strong><\/p>\n<div class=\"scroll-x\">\n<table style=\"min-width: 100%; border-collapse: collapse;\">\n<thead>\n<tr>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Fund scheme<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Equity<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Debt &amp; Others<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Commodities (gold &amp; silver)<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">ICICI Pru Multi-Asset Fund<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">66.76<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">24.47<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">10.9<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">SBI Multi Asset Allocation Fund<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">39.30<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">47.97<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">12.73<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">Kotak Multi Asset Allocation Fund<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">65.82<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">13.57<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">20.61<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">Nippon India Multi Asset Allocation Fund<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">63.86<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">21.56<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">14.58<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">UTI Multi Asset Allocation Fund<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">66.08<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">22.73<\/span><\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><span style=\"font-weight: 400;\">11.19<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><em><span style=\"font-weight: 400;\">Source: 1 Finance Research, as of September 2025<\/span><\/em><\/p>\n<p>Scroll right to view full table \u2013&gt;<\/p>\n<p>Also read: <a href=\"https:\/\/1finance.co.in\/blog\/multi-asset-allocation-fund-vs-gold-etfs-2025\/\">Multi-asset allocation fund vs. gold ETF: Which one to choose for gold exposure in 2025?<\/a><\/p>\n<p><span style=\"font-weight: 400;\">Now here\u2019s where the picture becomes clearer. Although equities occupy the largest share in these portfolios, they were not the primary drivers behind returns.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the past year, <\/span><a href=\"https:\/\/1finance.co.in\/blog\/looking-to-invest-in-gold-here-are-some-options-for-you\/\"><span style=\"font-weight: 400;\">gold<\/span><\/a><span style=\"font-weight: 400;\"> has delivered ~40% returns. In contrast, equity performance contributed less to returns due to relatively less market gains, with certain indices or sectors underperforming. As per NSE Indices website, Nifty 50 has underperformed, giving -2.01% 1Y return, as of August 30th, 2025. It\u2019s clear that many of these funds benefited from their gold exposure.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Every asset class goes through its market cycles of ups and downs, and that\u2019s what we witnessed in the case of equities here. This isn\u2019t necessarily a great multi-asset strategy at work, but a case of the right place (gold) at the right time. Still, these funds are being presented as \u201coutperformers\u201d, giving the impression that it\u2019s their diversified model that is working, which is misleading.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How much cost are you paying?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Now, let\u2019s address what it\u2019s costing you to invest in these funds.<\/span><\/p>\n<p><strong>Multi-asset allocation funds: Direct &amp; regular plans\u2019 expense ratios (%)<\/strong><\/p>\n<div class=\"scroll-x\">\n<table style=\"min-width: 100%; border-collapse: collapse;\">\n<thead>\n<tr>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Scheme name<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Direct plan<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Regular plan<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">ICICI Pru Multi-Asset Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.66<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">1.38<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">SBI Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.58<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">1.42<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Kotak Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.44<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">1.73<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Nippon India Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.28<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">1.44<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">UTI Multi Asset Allocation Fund<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.59<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">1.73<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><em><span style=\"font-weight: 400;\">Source: 1 Finance Research, as of September 2025<\/span><\/em><\/p>\n<p>Scroll right to view full table \u2013&gt;<\/p>\n<p><span style=\"font-weight: 400;\">As you can see, the direct plans of multi-asset allocation funds can be relatively expensive if you couple it with other schemes in your portfolio. The difference is more stark in regular plans due to their higher expense ratios.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To explain quickly, an expense ratio is the annual fees (expressed as a percentage) you have to pay to the fund house for managing your money. A value closer to 1% or more is usually considered higher.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">From what we can conclude (taking into account returns, asset allocation, and expense ratios), you are overpaying to build a diversified portfolio with a multi-asset allocation fund. You don\u2019t pay this separately. This fee is automatically adjusted in your returns. In other words, it\u2019s the \u201chidden cost\u201d you are paying.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here\u2019s the thing: you could easily achieve similar performance by directly allocating to individual asset classes (say, equity + debt funds + commodities), using low-cost schemes, as shown in the table below. In case of commodities, we are considering gold ETFs for our calculation.<\/span><\/p>\n<p><strong>Individual asset class: Direct plan expense ratios<\/strong><\/p>\n<div class=\"scroll-x\">\n<table style=\"min-width: 100%; border-collapse: collapse;\">\n<thead>\n<tr>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Asset type<\/strong><\/th>\n<th style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\"><strong>Average expense ratio (%)<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Equity index funds<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.10 \u2013 0.20<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Gold ETFs\/funds<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.45 \u2013 0.60<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">Debt funds (Liquid\/Short-term)<\/td>\n<td style=\"text-align: center;\" data-rowspan=\"1\" data-colspan=\"1\">0.20 \u2013 0.40<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Scroll right to view full table \u2013&gt;<\/p>\n<p><span style=\"font-weight: 400;\">As you can see, building your own mix with direct plans is relatively cost-efficient. You are being sold a \u2018package\u2019 in the name of diversification. And while the package seems convenient, it can cost more than building your own diversified mix.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How does the expense ratio affect your overall cost?<\/span><\/h2>\n<p>Let us explain with an example.<\/p>\n<p>Total invested amount: <span style=\"font-weight: 400;\">\u20b990 lakh<\/span><\/p>\n<p>Monthly SIP: <span style=\"font-weight: 400;\">\u20b9 50,000<\/span><\/p>\n<p>Assumed CAGR: 10%<\/p>\n<p>Years: 15<\/p>\n<div class=\"scroll-x\">\n<table style=\"min-width: 100%; border-collapse: collapse;\">\n<thead>\n<tr>\n<th data-rowspan=\"1\" data-colspan=\"1\">Asset allocation<\/th>\n<th data-rowspan=\"1\" data-colspan=\"1\">Average expense ratio<\/th>\n<th data-rowspan=\"1\" data-colspan=\"1\">Expected future value<\/th>\n<th data-rowspan=\"1\" data-colspan=\"1\">Total fees deducted<\/th>\n<th data-rowspan=\"1\" data-colspan=\"1\">Total gains over your invested amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td data-rowspan=\"1\" data-colspan=\"1\">MAAF [Direct Plan]<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">0.60%<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 1.98 cr<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 6.93 lakh<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 1.08 cr<\/td>\n<\/tr>\n<tr>\n<td data-rowspan=\"1\" data-colspan=\"1\">MAAF [Regular Plan]<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">1.54%<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 1.82 cr<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 16.78 lakh<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 91.52 lakh<\/td>\n<\/tr>\n<tr>\n<td data-rowspan=\"1\" data-colspan=\"1\">Equity + Debt + Gold ETF<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">0.26%<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 2.04 cr<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 3.05 lakh<\/td>\n<td data-rowspan=\"1\" data-colspan=\"1\">\u20b9 1.14 cr<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<div>\n<div class=\"scroll-x\">\n<div><em>Source: 1 Finance Research<\/em><\/div>\n<\/div>\n<\/div>\n<p>Scroll right to view full table \u2013&gt;<\/p>\n<p>Difference in total gains when compared with &#8220;equity + debt + gold ETF&#8221; allocation<\/p>\n<p>MAAF [Direct plan]: \u20b9 6.3 lakh<br \/>\nMAAF [Regular Plan]: \u20b9 22.5 lakh<\/p>\n<p>The comparison clearly shows that a DIY portfolio made up of equity, debt, and gold ETFs (with an average expense ratio of just 0.26%) outperforms both versions of the Multi-Asset Allocation Fund (MAAF). The DIY portfolio grows to \u20b92.04 crore, while the MAAF Direct Plan (0.60% expense ratio) reaches \u20b91.98 crore, and the MAAF Regular Plan (1.54% expense ratio) at just \u20b91.82 crore.<\/p>\n<p>The difference comes entirely from the drag created by higher expenses. Compared with the DIY portfolio total gains (\u20b9 1.14 cr) generated over the invested amount of \u20b9 90 lakh, you lose around \u20b96.3 lakh (as much as 5.8%) if you invest in MAAF Direct Plan and about \u20b922.5 lakh (around 24%) in MAAF Regular Plan.<\/p>\n<p>From this example, the lesson learned here is: If you can manage a DIY allocation across equity, debt, and gold yourself (silver or both), the lower expense ratios preserve more of your compounding than investing in a MAAF.<\/p>\n<h2><span style=\"font-weight: 400;\">Why generic asset allocation may not match your investment goals<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">An <\/span><a href=\"https:\/\/1finance.co.in\/blog\/what-is-asset-allocation-importance-of-asset-allocation-advantages-disadvantages\/\"><span style=\"font-weight: 400;\">asset allocation<\/span><\/a><span style=\"font-weight: 400;\"> is simply how you divide your money across different types of assets, usually equity (stocks), debt (bonds\/fixed income), gold\/silver, or other alternatives like real estate. Its key intention is to make the best use of each asset class across different market conditions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, equities perform better when the market sees an upward trend. Commodities like gold or silver hold their value during inflation or volatile conditions, when other assets underperform. It gives you the benefit of strategic asset allocation.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Personal goals need personalised allocations<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Here\u2019s where it gets critical. Multi-asset allocation funds returns are not tailor-made for your needs. It is a generic mix decided by the fund manager and not you. This defeats the point of strategic allocation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here\u2019s an example with two different people: a 25-year-old professional who seeks short-term opportunities and a 30-year-old cautious player who believes in playing the safe game.<\/span><\/p>\n<ol>\n<li><span style=\"font-weight: 400;\"> The 25-year-old professional is impulsive and chases market trends. He often gets influenced by the latest news. His asset allocation would like this:<\/span><\/li>\n<\/ol>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">45% in an asset or a sector currently trending<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">30% in diversified equity funds<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">25% in <a href=\"https:\/\/1finance.co.in\/blog\/risks-of-debt-mutual-funds\/\">debt funds<\/a><\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Conclusion: He likes the thrill of higher returns in a shorter time frame and doesn\u2019t want to regret missing opportunities.<\/span><\/p>\n<ol start=\"2\">\n<li><span style=\"font-weight: 400;\"> The 40-year-old fears market volatility and prefers safety over chasing short-term opportunities. His asset allocation would look like this:<\/span><\/li>\n<\/ol>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">55% in fixed deposits, bonds or debt funds<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">25% in equity funds (mostly large-cap or index funds)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">20% in gold<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Conclusion: This asset allocation tends to provide steady returns while also protecting the capital.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As you see, their financial personalities differ. That 25-year-old professional has different <a href=\"https:\/\/1finance.co.in\/blog\/how-emotional-investing-triggers-bad-financial-decisions\/\">beliefs towards investing<\/a>, risk comfort, goals, and money habits than the 30-year-old. Do you think that if both had invested in a multi-asset allocation fund that had a fixed allocation, it would have been the right fit for them? We don\u2019t think so, as evidenced by their asset choices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If your goal is genuine diversification, it usually makes more sense to build an allocation at the portfolio level that actually reflects your financial situation and comfort with risk.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Asset allocation is highly personal, shaped by your beliefs, your age, and importantly, your financial personality.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Understanding financial personality and why it\u2019s important for your asset allocation<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Financial personality is how you naturally deal with money. Your emotional response to money, your habits surrounding spending and savings, and in this case, market swings. And how you can find out yours? Through our MoneySign\u00ae, our patented technology that uses scientific framework to understand your unique money behaviour and patterns. Take this test to <a href=\"https:\/\/1finance.co.in\/blog\/who-are-you-financially-discover-your-financial-personality-with-moneysign-to-make-smart-money-decisions\/\">discover your financial personality<\/a>.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This financial personality ties up with asset allocation too, as we saw with the examples above. Remember this: <\/span><i><span style=\"font-weight: 400;\">asset allocation should depend on you. It should align with your comfort level and long-term goals.<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Before investing in funds like multi-asset allocation fund, consider what really matters:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Does this additional equity allocation suit your needs?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Does it match your risk personality?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Is it aligned with your financial goals?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Are you paying any hidden costs?<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Most investors don\u2019t pause to ask these questions. Instead of solving the problem of allocation, investors often end up with duplication and end up paying extra. For example, someone who already has equity-heavy funds, adding a multi-asset allocation fund is just adding more equities.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is where consulting with <a href=\"https:\/\/1finance.co.in\/talk-to-a-financial-advisor\">a Qualified Financial Advisor (QFA)<\/a> can really make a difference. You may think you have the right allocation, but the market swings will test your decision, and the truth will show up. So, why not go for a proper asset allocation and pay less in the first place?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A Qualified Financial Advisor (QFA) will sit with you, figure out what kind of investor you really are, and then suggest an asset allocation that actually works with your investment psychology and comfort level. More like a coach genuinely looking after your interests than someone selling financial products.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Conclusion<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The strong takeaway is this: asset allocation is hyper-personalized. It cannot be generic, and no single fund can decide it for you. Multi-asset allocation funds are presented as a \u201cone-stop solution\u201d for all asset allocation needs. In fact, many are marketing them using these returns, without providing any clarity to investors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Does this mean they are completely misleading? Not exactly. But it does mean that you need to look beyond the headlines and choose what is best for you, according to your financial personality.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Know the risks of multi-asset funds, not just returns<\/p>\n","protected":false},"featured_media":6662,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"_updated_date":""},"blog-category":[273],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.11 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Hidden risks of multi-asset allocation funds: Don\u2019t let its returns fool you<\/title>\n<meta name=\"description\" content=\"Explore the hidden risks of multi-asset allocation funds and how they can impact your long-term goals.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Hidden risks of multi-asset allocation funds: Don\u2019t let its returns fool you\" \/>\n<meta property=\"og:description\" content=\"Explore the hidden risks of multi-asset allocation funds and how they can impact your long-term goals.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/\" \/>\n<meta property=\"og:site_name\" content=\"Blogs\" \/>\n<meta property=\"article:modified_time\" content=\"2025-12-16T09:23:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/imaages-hosting-1fin.s3.ap-south-1.amazonaws.com\/assets\/ogimage\/Blog.png\" \/>\n\t<meta property=\"og:image:width\" content=\"2401\" \/>\n\t<meta property=\"og:image:height\" content=\"1601\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@1FinanceHQ\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"10 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/\",\"url\":\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/\",\"name\":\"Hidden risks of multi-asset allocation funds: Don\u2019t let its returns fool you\",\"isPartOf\":{\"@id\":\"https:\/\/1finance.co.in\/blog\/#website\"},\"datePublished\":\"2025-10-24T13:11:49+00:00\",\"dateModified\":\"2025-12-16T09:23:12+00:00\",\"description\":\"Explore the hidden risks of multi-asset allocation funds and how they can impact your long-term goals.\",\"breadcrumb\":{\"@id\":\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/\"]}],\"primaryImageOfPage\":{\"@id\":\"\"},\"image\":{\"@id\":\"\"}},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/1finance.co.in\/blog\/hidden-risks-of-multi-asset-allocation-funds\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/1finance.co.in\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Blogs\",\"item\":\"https:\/\/1finance.co.in\/blog\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Investing in multi-asset allocation funds? 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