Fund of Fortnight

This is our mutual fund recommendation. Every fortnight ,we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

SBI Multi Asset Allocation Fund - Direct Plan (Growth)


Reason for recommendation- 

The uncertainty in the equity market has increased and is clearly reflected in the rise of the volatility index despite equity indices going up. This does not mean that they are going to tumble down the way they did during the first quarter of 2020. Nonetheless, the US’ election outcome and progression of the pandemic will determine the future course of action. Hence, it is better to invest in funds that have performed well in these uncertain times. A multi-asset allocation fund is one such type of fund.

The objective of a multi-asset allocation fund is to generate long-term capital appreciation by investing in different asset classes, allowing investors to have a well-diversified portfolio. Our choice in this category is SBI Multi-Asset Allocation Fund. The fund invests in equity, debt as well as gold. At the end of September 2020, it had invested 40 per cent in equity, 33 per cent in debt, 18.97 per cent in gold through ETFs and the rest in cash. Year till date the fund has generated return of 8.5 per cent, better than equity funds and one of the best in its category.

The reason for such outperformance is the fund’s ability to contain its fall in the month of March 2020, when it fell by 8.39 per cent compared to more than 20 per cent by major equity indices. In case of equity, the fund seems to be biased towards large-cap, holding 90 per cent of its equity assets in large-cap stocks, whereas in case of debt instruments the fund invests based on evaluation of macro-economic factors, market dynamics and issue-specific factors. The fund is suited for moderate risk-taking investors who want to invest for more than one year.