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 Warren Buffett
 He ranks among the most successful investors in history, which is why everyone pays attention whenever he shares insights about his investment approach. Throughout his 60-year tenure at the helm of Berkshire Hathaway, Buffett has built his wealth by pinpointing underpriced companies and acquiring them.


 Shareholders of Berkshire Hathaway have seen tremendous gains under Buffett’s leadership, with the company's stock providing an annual return of 19.9% since 1965, as opposed to 10.4% for the S&P 500.
 S&P 500
 .


 It might have been unexpected when Buffett disclosed that his spouse's inheritance would be placed into a trust, with 90 percent of those funds allocated this way.
 S&P 500 index fund
 and the rest allocated to short-term government bonds.


 If you're attempting to determine which asset allocations best suit your needs, it could be beneficial to
 consult with a financial planner
 . DIWIDA’s
 financial advisor matching tool
 Can assist you in locating an advisor nearby.


 Here’s how Buffett commented on the 90/10 approach and if this tactic holds up in today’s world.

<h2>
 Warren Buffett’s 90/10 portfolio
</h2>

 In his 2013 letter to
 Berkshire shareholders
 Buffett promoted the advantages of holding stocks over an extended period and demonstrated that even individuals with minimal knowledge of investing can attain acceptable outcomes. To illustrate this, he shared his guidelines for managing his wife’s estate after his passing.


 My advice for the trustee can’t get simpler: Allocate 10% of the capital into short-term government bonds and the remaining 90% into a highly affordable S&P 500 index fund, such as one offered by Vanguard," Buffett stated. "I am confident that the trust’s long-term performance under this strategy will outshine those achieved by many investors—be they pension funds, institutions, or individuals—who opt for high-fee managers.


 After the release of the letter, Buffett expanded on his recommendations during an interview with CNBC.


 I outlined what I believe the typical individual without expertise in stocks should do. My widow won't have such knowledge," Buffett stated. "I aim to ensure she achieves a reasonable outcome. It’s clear she won’t attain extraordinary returns.


 The rationale behind the 10% allocation to short-term government securities is that during tough times in the financial markets, when she needs to withdraw around 3% or 4% annually, those funds can be sourced from this portion rather than liquidating equities at an unfavorable moment," explained Buffett. "This approach ensures her success and guarantees positive outcomes for anyone following it. This strategy involves minimal costs and invests in numerous excellent companies, thereby requiring little intervention.

<div class="editorial-insight-box">
 
 
 Need an advisor?
 
 
 
 Looking for professional advice on handling your investments or preparing for retirement?
 
 
 DIWIDA’s AdvisorMatch
 I can connect you with a Certified Financial Planner™ who will assist you in achieving your financial objectives.
 
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<h2>
 Does the 90/10 investment approach hold water?
</h2>

 Buffett’s 90/10 investment strategy holds considerable allure, yet it may not be suitable for all investors. Given that Buffett’s wife will probably receive far more wealth than necessary for her livelihood—since nearly all his Berkshire shares are designated for charitable purposes—the situation becomes quite different.
 stock market volatility
 is not expected to affect her lifestyle.


 However, not all investors feel at ease with volatility, according to Ryan Linenger, a Chicago-based partner at Plante Moran Financial Advisors.


 It can be extremely challenging for numerous investors to tolerate the level of fluctuation in a portfolio composed of 90% equities," Linenger stated. "Being invested in a portfolio you cannot remain committed to during market downturns can have negative consequences—often leading to unwise decisions which may significantly diminish the returns an investor ought to earn over the long term.


 Linenger suggested that allocating a significant part of the "growth segment" of a long-term investment portfolio to an S&P 500 index fund could be sensible. However, he believes that investors might gain additional advantages through more extensive diversification.


 Linenger stated that a 90/10 portfolio "would leave out most of the publicly traded firms both within the U.S. and internationally, as well as various sectors of the bond market — thereby shrinking the potential investment options without justification."

<h2>
 90/10 asset allocation: Pros and cons
</h2>
<h3>
 Advantages
</h3>
<ul>
 <li>
 
 Simplicity:
 
 The 90/10 strategy is straightforward to implement and simplifies the process of portfolio rebalancing.
 </li>
 <li>
 
 Low-cost:
 
 Index funds
 Tracks of the S&P 500 are highly affordable, usually charging around $3 for each $10,000 invested, and there are also options available with zero expense ratio.
 </li>
 <li>
 
 Stock market growth:
 
 With 90 percent of your investment portfolio allocated to an S&P 500 index fund, you will reap the rewards of its strong long-term returns.
 stocks
 , maintaining an approximate annual rate of 10 percent over extended durations.
 </li>
 <li>
 
 Diversification:
 
 By opting for a widely diversified index fund, investors avoid the risks associated with attempting to select particular winning or losing stocks.
 </li>
</ul>
<h3>
 Disadvantages
</h3>
<ul>
 <li>
 
 High allocation to stocks:
 
 The primary drawback of a 90/10 investment portfolio is that most of your funds are susceptible to the fluctuations of stock markets.
 </li>
 <li>
 
 Risk for retirees:
 
 Certain retired individuals might feel uneasy about having a significant portion of their investments in stocks. They could prefer a less risky investment portfolio with a greater emphasis on bonds or cash equivalents.
 fixed income investments
 might suit some people better.
 </li>
 <li>
 
 Not suitable for investors with a low risk tolerance.
 
 
 risk tolerance
 
 
 :
 
 Certain investors can't cope with fluctuations in the stock market and might make unwise choices precisely when prices have dropped.
 </li>
</ul>
<h2>
 Bottom line
</h2>

 Buffett’s 90/10 strategy offers a straightforward and inexpensive method for managing a portfolio capable of handling significant ups and downs. However, those who are particularly sensitive to swings in the stock market might want to opt for owning less equity and spreading out investments widely. This approach helps them adhere to their investment plans and ultimately reach their financial goals.
 long-term financial goals
 You might additionally consider
 seek advice from a financial consultant
 for further guidance.


 Editorial Disclaimer: It is recommended that all investors perform their own thorough research into investment strategies prior to making an investment choice. Additionally, it should be noted that previous performance of investment products does not ensure future growth in value.

Warren Buffett's 90/10 Portfolio: Will This Strategy Hold Up in 2025?

Unknown investing, investment portfolios, investment strategies and advice, investors, warren buffett

Warren Buffett He ranks among the most successful investors in history, which is why everyone pays attention whenever he shares insights about his investment approach. Throughout his 60-year tenure…

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<h2>
 Q. My wife and I have been investing in an equity mutual fund for the past 7 years. We now intend to diversify. Many of our acquaintances have suggested that we invest in the hybrid mutual funds category. Can you please elaborate on multi-asset allocation funds, the pros and cons of investing in them and how multi-asset allocation funds are different from equity mutual funds.
</h2>

 
 Vikrant Sharma, New Delhi
 

<h2>
 What are multi-asset allocation funds?
</h2>

 Multi-asset allocation funds are hybrid mutual funds that invest in at least three different asset classes, with a minimum allocation of 10% in each asset class. Typically multi-asset allocation funds invest in equity, debt, and one additional asset class such as gold, real estate, or commodities. These funds aim to provide investors with a diversified portfolio that can balance risk and return more effectively than investing in a single asset class.


 Before we deep dive into multi-asset allocation funds it is important to understand what hybrid mutual funds category is, of which multi-asset allocation fund is a sub-category.

<h2>
 What are hybrid mutual funds?
</h2>

 Hybrid mutual funds, often referred to as balanced funds, are mutual funds that combine a mix of equity, debt, and sometimes other asset classes like commodities or real estate. The primary objective of hybrid
 mutual funds
 is to achieve a balance between growth and income while managing the risk associated with market volatility.


 By diversifying across different asset classes, these funds aim to provide investors with a more stable investment experience compared to pure equity or debt funds.


 The allocation of assets within a
 hybrid mutual fund
 can vary widely, with some funds maintaining a fixed ratio of equities to bonds, while others may actively adjust their allocations based on market conditions and economic outlook. This flexibility allows fund managers to capitalise on market opportunities and mitigate risks.


 Hybrid mutual funds are suitable for investors who seek a diversified investment approach without the need to manage individual investments actively. These funds can be an excellent choice for long-term goals such as retirement planning, as they offer the potential for capital appreciation and regular income.

<h2>
 Advantages of multi-asset allocation funds
</h2>

 There are multiple benefits of investing in multi-asset allocation funds, we have listed down below the key benefits of multi-asset allocation funds.


 
 Diverse asset mix:
 
 At the heart of multi-asset allocation funds is the principle of diversification. These funds invest across a range of asset classes, including equities, bonds, real estate, commodities, and cash equivalents. By spreading investments across different assets, these funds reduce the impact of poor performance in any single asset class on the overall portfolio, enhancing stability and minimising risk.


 
 Dynamic asset allocation:
 
 One of the defining features of multi-asset allocation funds is their flexibility in adjusting asset allocations based on market conditions, economic trends, and investment objectives. Fund managers actively monitor the financial landscape and make strategic shifts to capitalise on opportunities and manage risks. This dynamic approach allows for a more responsive and adaptive investment strategy, tailored to changing market environments.


 
 Risk management:
 
 A key advantage of multi-asset allocation funds is their ability to manage risk effectively. By diversifying across various asset classes, these funds can balance the inherent risks associated with each asset.


 For instance, while equities offer growth potential, they come with higher volatility. Bonds, on the other hand, provide more stability but may offer lower returns. By combining these assets, multi-asset allocation funds can achieve a more balanced risk-return profile, making them suitable for a wide range of investors.


 
 Income generation and capital appreciation:
 
 Multi-asset allocation funds aim to deliver both income generation and capital appreciation. By including income-generating assets such as bonds and real estate alongside growth-oriented equities, these funds can provide a steady stream of income while also seeking capital growth. This dual objective makes them particularly appealing for investors looking to achieve long-term financial goals, such as retirement planning.


 
 Professional management:
 
 Investing in multi-asset allocation funds means entrusting your portfolio to experienced fund managers who possess in-depth knowledge of various asset classes and market dynamics. These professionals employ sophisticated investment strategies, rigorous research, and continuous monitoring to optimise asset allocation and performance. For investors seeking a hands-off approach, professional management offers peace of mind and the potential for enhanced returns.


 
 Accessibility and convenience:
 
 Multi-asset allocation funds offer a convenient and accessible way for investors to diversify their portfolios without the need to manage multiple individual investments. With a single investment, investors can gain exposure to a broad range of assets, reducing the complexity and effort required to maintain a diversified portfolio. This accessibility makes these funds an attractive option for both novice and seasoned investors.


 
 Alignment with investment goals:
 
 Multi-asset allocation funds can be tailored to suit various investment goals and risk tolerances. Whether an investor is seeking conservative income, balanced growth, or aggressive capital appreciation, there is likely a multi-asset allocation fund that aligns with their objectives. This customisation ensures that investors can find a fund that matches their unique financial goals and preferences.

<h2>
 Cons of multi-asset allocation funds
</h2>

 Investing in any kind of market-linked investment is not risk-free. Some of the key risk associated with investing in multi-asset allocation funds are as follows:


 
 Potentially moderate returns:
 
 Multi-asset allocation funds often strive to strike a balance between the high-growth potential of equities and the stability of bonds. However, this balance can sometimes result in moderate returns. Unlike pure equity funds, which can capitalise on significant stock market gains, multi-asset allocation funds may miss out on these opportunities due to their bond holdings. Similarly, during periods of rising interest rates, the bond component of hybrid funds may underperform, further limiting returns.


 
 Higher expense ratios:
 
 Multi-asset allocation funds typically involve active management, which can result in higher expense ratios compared to passive index funds or pure equity or debt funds. The need for constant rebalancing and asset allocation decisions by fund managers contributes to these higher costs. Over time, these expenses can erode the overall returns for investors, making it crucial to consider the fee structure before investing.


 
 Market timing risks:
 
 The success of a hybrid mutual fund largely depends on the fund manager's ability to make timely asset allocation decisions. If the manager fails to predict market trends accurately, the fund's performance can suffer. For instance, an incorrect allocation towards equities during a market downturn can lead to significant losses, while an overly conservative approach during a bull market can result in missed opportunities for capital appreciation

<h2>
 Who should invest in multi-asset allocation funds?
</h2>

 Multi-asset allocation funds have gained popularity among investors seeking a balanced and diversified approach to investing. We have mentioned the key categories of investors who should invest in
 multi-asset allocation funds
 .


 
 Investors avoiding high risk:
 
 Investors trying to avoid high-risk pure equity mutual funds can benefit from multi-asset allocation funds due to their balanced risk-return profile. By spreading investments across different asset classes, these funds help mitigate the impact of volatility and reduce the overall risk of the portfolio. For individuals who are cautious about market fluctuations and prefer a more stable investment approach, multi-asset allocation funds offer a compelling option.


 
 Long-term investors:
 
 Multi-asset allocation funds are well-suited for long-term investors who have a time horizon of several years or more. These funds aim to deliver both income generation and capital appreciation, making them ideal for long-term financial goals such as retirement planning, education funding, or building a nest egg. The dynamic asset allocation strategy of these funds allows for adjustments based on changing market conditions, enhancing the potential for sustained growth over time.


 
 Busy professionals and individuals with limited time:
 
 For busy professionals and individuals with limited time to actively manage their investments, multi-asset allocation funds offer a convenient and efficient solution. The professional management experienced fund managers ensure that the portfolio is continuously monitored and adjusted to optimise performance. This hands-off approach allows investors to focus on their careers, families, and other priorities while still benefiting from a diversified investment strategy.

<h2>
 Performance and returns
</h2>

 Most mutual funds in India offer multi-asset allocation funds schemes. Below we have listed the top 5 multi-asset allocation funds based on their past 5-year return (CAGR). As one can see, the top five funds in case of multi-asset allocation funds are north of 14%.


 
 Note: All data obtained from AMFI website as on 3 March 2025
 


 
 Past returns are not indicative of future performance.
 

<h2>
 Key factors to consider before investing in multi-asset allocation funds
</h2>

 Investing in multi-asset allocation funds can be an excellent way to diversify your portfolio and achieve a balanced risk-return profile. However, before diving into multi-asset allocation funds, it's essential to consider several key factors that can influence your investment experience and outcomes.


 
 Investment objectives:
 
 The first and foremost factor to consider is your investment objectives. Determine your financial goals, such as capital appreciation, income generation, or a combination of both. Multi-asset allocation funds can be tailored to suit different objectives, so it's crucial to choose a fund that aligns with your specific goals. Understanding your objectives will help you select the right fund that matches your risk tolerance and time horizon.


 
 Risk tolerance:
 
 Assessing your risk tolerance is vital when investing in multi-asset allocation funds. These funds offer a diversified approach to managing risk, but they still carry varying levels of risk depending on their asset allocation. Some funds may have a higher proportion of equities, making them more volatile, while others may focus on fixed-income securities for stability. Evaluate your comfort level with market fluctuations and choose a fund that fits your risk profile.


 
 Asset allocation strategy:
 
 The asset allocation strategy of a multi-asset allocation fund plays a significant role in its performance. Funds can have different approaches to asset allocation, such as static allocation, tactical allocation, or dynamic allocation. Static allocation maintains a fixed ratio of assets, while tactical and dynamic allocation adjusts the asset mix based on market conditions and economic outlook. Understanding the fund's asset allocation strategy will help you gauge its responsiveness to market changes and potential for returns.


 
 Fund manager expertise:
 
 The success of a multi-asset allocation fund largely depends on the expertise and experience of the fund manager. Research the fund manager's track record, investment philosophy, and decision-making process. A skilled and experienced manager can navigate market complexities, make informed asset allocation decisions, and optimize the fund's performance. Look for funds managed by professionals with a proven history of delivering consistent returns.


 
 Expense ratios and fees:
 
 Multi-asset allocation funds often come with higher expense ratios compared to single-asset funds due to their active management and diverse holdings. It's essential to consider the fund's expense ratio and any additional fees, such as management fees, administrative fees, and transaction costs. Higher fees can erode your overall returns, so weigh the costs against the potential benefits of the fund's performance.


 
 Historical performance:
 
 While past performance is not indicative of future results, analysing a fund's historical performance can provide insights into its consistency and resilience in different market conditions. Review the fund's performance over various time periods, including bull and bear markets, to assess its ability to deliver stable returns. Compare the fund's performance with relevant benchmarks and peer funds to gauge its relative strength.


 
 Liquidity and accessibility:
 
 Consider the liquidity and accessibility of the multi-asset allocation fund. Some funds may have lock-in periods or restrictions on withdrawals, which can affect your ability to access your money when needed. Additionally, check the minimum investment requirements and ensure they align with your financial capabilities. Opt for funds that offer flexibility and ease of access to your investments.

<h2>
 Conclusion
</h2>

 Investing in multi-asset allocation funds can be a strategic way to diversify your portfolio and achieve your
 financial goals
 . They are ideal for investors looking for steady returns with lower risk. By understanding the features, advantages, and tax implications, investors can make informed decisions to achieve their financial goals.


 By considering factors such as investment objectives, risk tolerance, asset allocation strategy, fund manager expertise, expense ratios, historical performance, diversification benefits, liquidity, and
 tax
 Implications allow you to make educated choices that match your investment approach. Perform comprehensive analysis, assess various possibilities, and seek advice from financial experts to confirm that multi-asset allocation funds suit your investment path.


 
 Disclaimer: Mutual fund investments come with risks, such as the possibility of losing your initial capital. It is advisable to seek advice from a financial advisor prior to making any investment choices.
 


 
 Kuvera is a free platform for directly investing in mutual funds.

Q&A: What Sets Multi-Asset Allocation Funds Apart From Equity Funds in India?

Unknown equities, investing, investment strategies and advice, mutual fund investement strategies and advice, mutual funds

Q. My wife and I have been investing in an equity mutual fund for the past 7 years. We now intend to diversify. Many of our acquaintances have suggested that we invest in the hybrid mutual funds cat…