Multi-Asset Allocation Funds

Multi-Asset Allocation Funds (MAAFs) are an open-ended hybrid mutual fund that invests across at least three different asset classes with a minimum allocation of 10% in each asset class. The fund can invest in asset classes such as equity, debt, gold and other permitted securities, depending on the scheme's strategy.

The aim is to diversify investments across assets that may perform differently under different market conditions. For example, equity may provide growth potential, while debt and gold can provide diversification and may behave differently during various market cycles.

Since the fund invests across multiple asset classes, its returns are market-linked and can fluctuate. Therefore, it does not offer guaranteed returns. 

The fund manager pools money from investors and allocates it across different asset classes such as equity, debt and gold. The portfolio is managed according to market conditions and the scheme's strategy, with investments rebalanced when required.

Since different asset classes perform differently in different market conditions, their performance contributes to the fund's overall returns. The value of your investment is reflected through the NAV (Net Asset Value) of the fund, which can rise or fall based on the performance of its underlying investments.

• Investors seeking diversification: If you desire to gain access to various asset classes via a single mutual fund, this category is worth considering.
• Investors with a moderate to high risk appetite: These funds may be suitable for those who are comfortable with market volatility and a certain degree of risk in pursuit of potential growth.
• Investors with a medium to long-term horizon: Those who can stay invested for several years may consider these funds to benefit from diversification across different asset classes.

Follow the simple steps below to start investing in multi-asset allocation funds:

Step 1: Open the Paisabazaar app and log in with your registered mobile number
Step 2: Click on ‘Mutual Funds’ on the homescreen  
Step 3: Search or browser Multi-Asset Allocation funds and choose one that suits your goals and risk-appetite. 
Step 4: Select the mode of investment such as lump sum or SIP. 
Step 5: Complete your KYC verification to start investing in Multi-Asset Hybrid Funds. 

The taxation of Multi-Asset Allocation Funds depends on their equity exposure. The 65% equity threshold is important in determining whether the fund is taxed as an equity-oriented fund or under other mutual fund tax rules. 

• Equity-Oriented Multi-Asset Funds (Equity Allocation ≥ 65%) - If the fund has invested at least 65% in equity, then units sold within 12 months are treated as Short-Term Capital Gains (STCG) and taxed at 20%. On the other hand, units sold after 12 months are considered Long-Term Capital Gains (LTCG). LTCG is taxed at 12.5% with an annual exemption limit of Rs 1.25 lakhs on total gains.
  

• Non-Equity Multi-Asset Funds (Equity Allocation < 65%) - If the fund invests less than 65% in equities, it is treated differently. For units held for less than 24 months, gains are treated as STCG and taxed according to your applicable income tax slab. In contrast, LTCG is taxed at a flat rate of 12.5% without the benefit of indexation.