Multi-Asset Class

What is a 'Multi-Asset Class'

A multiasset class, also known as a multiple-asset class or multiasset fund, is a combination of asset classes (such as cash, equity or bonds) used as an investment. A multiasset class investment contains more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes vary according to the individual investor.

BREAKING DOWN 'Multi-Asset Class'

Multiasset class investments increase the diversification of an overall portfolio by distributing investments throughout several classes. This reduces risk (volatility) compared to holding one class of assets, but might also hinder potential returns. For example, a multiasset class investor might hold bonds, stocks, cash and real property, whereas a single-class investor might only hold stocks. One asset class might outperform during a particular period of time, but historically, no asset class will outperform during every period.

Risk Tolerance Funds

Many mutual fund companies offer asset allocation funds that are designed to perform according to an investor’s tolerance for risk. The funds can range from aggressive to conservative in nature. An aggressive-style fund would have a much higher allocation to equities, with maybe as much as 100%. The Fidelity Asset Manager 85% fund (“FAMRX”) is an example of an aggressive fund. The fund is designed to keep 85% of the fund’s allocation in equities and 15% between fixed income and cash. For conservative investors, a fund’s allocation would have significantly more concentration in fixed income. The Fidelity Asset Manager 20% fund (“FASIX”) has 20% in stocks, 50% in fixed income and 30% in short-term money market funds.

Target Date Funds

Target date funds are multiasset funds that change the allocation according to the investor’s time horizon. Investors would select the fund that would closely mirror their personal time horizon. For example, an investor not retiring for over 30 years should select one of the 2045 or later target funds. The later the date on the fund, the more aggressive the fund is due to the longer time horizon. A 2050 target date fund has over 85 to 90% in equities and the remaining in fixed income or money market.

An investor whose time horizon is significantly shorter would select one of the more recent maturing funds. Someone retiring in five years would have a target date fund with a higher level of fixed income to reduce the overall risk and focus on capital preservation.

Target date funds are beneficial for investors who do not want to be involved in choosing an appropriate asset allocation. As the investor ages and the time horizon lessens, so does the risk level of the target date fund. Over time, the fund gradually moves from equities to fixed income and money market automatically.

See if you can create your own mix of investments by reading Multiasset Funds Or Your Own Mix?

RELATED TERMS
  1. Asset Mix

    The classification of all assets within a fund or portfolio. ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave ...
  3. Asset Allocation Fund

    A mutual fund that provides investors with a portfolio of a fixed ...
  4. Asset Class Breakdown

    The relative percentages of core asset classes such as equities, ...
  5. Class Of Shares

    1. Types of listed company stock that are differentiated by the ...
  6. Share Class

    A designation applied to a specified type of security such as ...
Related Articles
  1. ETFs & Mutual Funds

    The Top Multi-Asset Exchange-traded Funds

    The importance of an effective diversification cannot be stressed enough. Established multi-asset ETFs can help to increase diversification.
  2. Markets

    What is an Asset Class?

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
  3. Managing Wealth

    Diversification: It's All About (Asset) Class

    Frustrated stock pickers rejoice - asset class selection is simpler and safer.
  4. ETFs & Mutual Funds

    Fidelity Asset Allocation Funds Overview

    Learn the different types of asset allocation funds that Fidelity offers; such as the target-date, target risk and income replacement funds.
  5. ETFs & Mutual Funds

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular investment for retirement. Here's how to choose the best share class when investing in them.
  6. ETFs & Mutual Funds

    Target Date Funds: More Popular, Cheaper Than Ever

    How target date funds can help investors weather volatility when it comes to saving for retirement.
  7. ETFs & Mutual Funds

    4 J.P. Morgan Mutual Funds with Long Track Records

    Discover four mutual funds administered and managed by J.P. Morgan that invest in a wide variety of securities and have long track records.
  8. ETFs & Mutual Funds

    The Pros And Cons Of Target-Date Funds

    These accounts will take charge of your retirement savings, but should you let them?
  9. Retirement

    An Introduction To Target Date Funds

    Target date mutual funds can be an alternative to bonds and CDs for investors who do not wish to actively manage their savings. The reason: These financial products periodically reallocate fund ...
  10. Managing Wealth

    What's Behind So Many Mutual Fund Share Classes?

    Despite the confusion they create, the number of share classes offered by mutual fund families will most likely continue to grow. Here's why.
RELATED FAQS
  1. Can I transfer Class A shares of one fund into Class A shares of another without ...

  2. Which class (class A, B, C) shares should I purchase if my time horizon is long term, ...

  3. Why are mutual fund investment minimums different?

    Discover why mutual funds carry different minimum investments, and learn about benefits that come with investing in funds ... Read Answer >>
  4. How do I know when to "rebalance" my investments?

    In order to have a disciplined approach using "rebalancing style" investing, you must first setup a defined model that specifies ... Read Answer >>
  5. How are a mutual fund's C shares different from A and B shares?

    Learn how a class C share differs from a class A or B share in relation to a mutual fund. Read Answer >>
  6. How can I use asset allocation to properly diversify my portfolio?

    Understand how asset allocation works, and learn how you can use asset allocation to diversify your investment portfolio ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center