Multi-asset investing can help you mitigate risk – here is what you should know about it

When it comes to investing your funds, putting the eggs in multiple baskets is always a smart decision. 

Multi-asset portfolios have been popular for a while because they deliver predefined outcomes to investors, which can be translated into stable income streams and high returns. As their name suggests, they require investing in different asset categories – cryptocurrencies, bonds, equities, cash, and other alternatives. The idea behind this approach is that each asset category behaves differently and provides the investor a degree of security in times of financial instability and the possibility of taking advantage of the performing markets. While multi-asset investing evolved over the years, its primary purpose remained the same – it aimed to deliver investors an attractive return on their investment and maintain a low level of risk. 


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What is multi-asset investing

If you’ve been thinking of diversifying your portfolio and adding more assets, you’re not the only one. Many people choose to invest in multiple assets because it allows them to diversify their investments and spread the risk across several classes. Multi-asset investing implies holding more than two asset categories in a portfolio. Stocks, bonds, real estate, and gold are the most common classes. However, over the last few years, more and more investors have added cryptocurrencies to their portfolios as they grew in popularity. Even though most assets are traded similarly, they behave differently and have typical risks and performance trends. Therefore, if you choose to engage in multi-asset investing, research is recommended to understand how each category behaves in the market. 

How does multi-asset investing work?

Depending on the assets you add to your portfolio, you can carry a multi-asset investing plan in various ways. Bonds and stocks make the bulk of the average portfolio, but you can also invest in collectibles, commodities, real estate, cash, foreign currencies, cryptocurrencies, and precious metals. A diversified multi-asset portfolio includes a wide array of assets. You should research the market and invest in as many as possible because an asset can underperform or outperform the others at a certain point and provide you the chance to make an income. A multi-asset portfolio protects your finances against significant market changes and volatility. 

Experienced multi-asset portfolio managers approach investing in two ways:

–         Strategic case allocation. The main portion of the portfolio that is expected to deliver a specific outcome in terms of return and risk is created according to the investor’s view of asset category behaviour over an extended period. They usually rely on scientific modelling to identify the ideal combination of assets that could deliver the expected results in the determined period. 

–         Tactical asset allocation. The investor adjusts the portfolio’s exposure according to the market’s movements aiming to add value to their investment by taking advantage of short-term opportunities. 

Why is multi-asset investing so popular?

As stated before, the popularity of this investing method increased over the last few years. Nowadays, the majority of investment portfolios include more than an asset class. Here are some reasons why investors decided to add more products to their portfolios. 

  • The global financial crisis in 2008 showed people that adding only equities to their investment portfolio isn’t enough to protect them from capital loss. Bonds and equities fell in unison, showing entrepreneurs that they have to truly diversify their investments and blend an array of different asset classes. 
  • The demand for outcome-focused investments has driven the focus on investor solutions. People nowadays search for investments that meet particular needs. They want a sustainable income and can obtain it only through a mix of income and capital growth. 
  • The demand for off-the-shelf solutions is higher than ever, and multi-asset investments allow people to outsource their decisions to an expert who can manage all assets to ensure they align with their specific goal and defined level of risk. 
  • The present market conditions and political setting encourage investors to turn to multi-asset investing to navigate these tricky waters and deal with high volatility. 

Reasons why you should consider multi-asset investing

All asset categories have their own return and risk characteristics, and therefore their performance varies according to the market conditions. For example, cryptocurrencies are volatile over long-term periods, while equities are volatile over short-term periods, and the reward and risk vary for each. Also, gold performs better during times of market or economic uncertainty. Multi-asset investing implies building a portfolio that mixes asset classes that behave differently in market scenarios. 

The main reasons why multi-asset investing is vital are:

  • Diversification is essential. It’s challenging to predict losers and winners, considering that asset class performance varies in time. Each asset category has different return and economic drivers and therefore experiences a varied performance over a period. Entrepreneurs use tools like the app from to track their assets’ performance and make financial decisions because it allows them to manage multiple assets at the same time. Diversification is essential because it reduces risk exposure and allows the investor to balance the high volatility of an asset with another’s stability. 
  • Investors no longer have to constantly track the market’s movements because a fund manager manages their diversified portfolio. 
  • Wider exposure to various currencies, geographies, sectors, and companies. Investors can select from a wide range of asset classes. Multi-asset investments can generate potential returns while reducing risk exposure and providing the entrepreneur with a well-balanced portfolio. 
  • Multi-asset funds are ideal for people who want to diversify their portfolio by exposing it to multiple asset categories and are looking for a medium to long-term investment time. 

Final words

A multi-asset investment strategy mixes different categories of assets such as cryptocurrencies, real estate, stocks, and bonds to create a broadly diversified and nimble portfolio. It relies on the idea that markets are interconnected, and information and events impact more than one asset class. Investors make decisions considering the big picture and the particular outcomes they’re interested in. Multi-asset funding strategies enable people to achieve their financial goals and achieve growth, cash flow, consistent returns, and a consistent lifetime consumption across several periods. 

Nathaniel Villa
Nathaniel Villa