Multi-asset allocation fund inflows plunge 59% to Rs 1,514 crore in October. Are they still good for diversification?

Multi-asset allocation mutual funds witnessed a sharp decline in investor interest in October, with monthly inflows falling 59% to Rs 1,514 crore from Rs 3,666 crore in September, according to data from the Association of Mutual Funds in India (AMFI).

With the decline in monthly inflows, the key question is whether investors are booking profits, shifting their preferences between asset classes or becoming cautious amid market uncertainty?

Rajesh Minocha, a Certified Financial Planner (CFP) and Founder of Financial Radiance, shared with ETMutualFunds that the decline in multi-asset allocation could reflect profit-taking after recent gains in metals, as investors reassess their holdings amid changing conditions.


However, one-month inflow data should not be viewed as evidence of a lasting shift in investment preferences. This trend may also result from the tapering of heavy inflows seen in September, Minocha further said.

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Mukesh Kumawat, Executive Director, Anand Rathi Wealth Limited told ETMutualFunds that the sharp fall in inflows can be attributed to a combination of changing investor preferences, recency bias, and profit booking, investor interest in multi-asset allocation funds is partly driven by the convenience they offer as they get exposure to gold along with other asset classes without having to decide how much to invest in each one.

However, investor preferences can change depending on how an asset performs. When gold prices were rising sharply, more investors wanted exposure to the precious metal, either directly or through multi-asset allocation funds. With gold prices now correcting, some of that interest may have faded. This reflects recency bias, where investors tend to favour an asset based on its recent performance. There could also be some profit booking by investors who are choosing to sell some of their investments and lock in those gains, Kumawat further said.

The monthly data by AMFI showed that in September, multi asset allocation funds received the highest inflows. On a yearly basis, the inflows declined by 72% from Rs 5,344 crore in October 2025.

There were nearly 37 multi asset allocation funds in the said time period that gave a negative average return of 1.41% in October. Kotak Multi Asset Allocation Fund lost the most of around 3.83%, followed by Bank of India Multi Asset Allocation Fund that lost 3.48% in the same time period.

Edelweiss Multi Asset Allocation Fund gained the most of around 0.37%. ICICI Pru Multi Asset Allocation Fund, the largest fund in the category based on the assets managed, lost 1.35% in October.

How should investors use multi-asset funds amid market volatility?

Kumawat said that investors should avoid multi-asset allocation funds and instead build exposure to different asset classes through specific mutual fund categories which allows them to choose how much they want to invest in each asset class.

Investors can choose diversified equity funds for equity exposure, target maturity or arbitrage funds for debt, and gold ETFs for gold exposure. Silver may be best avoided due to its high volatility and unpredictable price movements. Before investing in gold, investors should be clear about its purpose in their portfolio, he further said.

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Minocha said that multi-asset funds invest across various asset classes like equity, debt, commodities and REITs and are regularly rebalanced; their primary advantage is diversification and ongoing adjustment.

However, investors should review each fund’s asset allocation rather than assume all multi-asset funds are identical, which they are not, he further said.

In October, inflows into gold exchange-traded funds (ETFs) declined 22% in October, while silver ETFs witnessed a 57% jump.

According to the AMFI data, gold ETFs received an inflow of Rs 3,474 crore in October compared to Rs 4,450 crore in September. On the other hand, silver ETFs received an inflow of Rs 3,092 crore in October against an inflow of Rs 1,974 crore in September.

What do gold and silver ETF inflows signal?

Minocha said the decline in gold ETF inflows could indicate profit booking after the metal's strong recent performance. In contrast, the rise in silver ETF inflows suggests growing investor interest, potentially driven by higher demand and recent price movements.

However, he cautioned investors against overlooking silver's volatility while considering fresh investments in the metal.

Kumawat said that Gold ETF inflows show how closely investor interest tends to follow gold prices. When prices rise sharply, more investors are drawn to gold ETFs and inflows increase. However, when prices start correcting, investor interest tends to slow down. This suggests that many investors are influenced by recent price movements rather than following a regular investment approach. The impact of this behaviour is also visible in the returns investors earn.

He further said that the recent decline in gold ETF inflows also suggest that investors who entered after the sharp rally are now becoming cautious as prices correct. Silver, however, behaves quite differently from gold. Its prices are more volatile and movements are harder to predict. Therefore, it would be difficult to draw a conclusion about the recent movement in silver ETF inflows.

What are multi asset allocation funds?

Multi-asset allocation funds invest across equities, debt and commodities such as gold and silver, offering built-in diversification within a single scheme. For many investors, this structure reduces the need to actively rebalance portfolios during uncertain market phases.

Gold and silver as precious metals have drawn attention as both are traditionally seen as hedges during periods of uncertainty. Gold is often preferred for capital protection, while silver benefits from both safe-haven demand and its industrial use. Their inclusion in multi-asset funds has helped investors balance growth with stability.

Kumawat said that for investors who are just starting out and have a relatively small portfolio of around Rs 1–2 lakh, multi-asset allocation funds can be a convenient option as they offer exposure to different asset classes through a single fund, making it easier to diversify without having to manage separate investments.

However, as the portfolio grows, investors should gradually take charge of their own asset allocation. They can choose how much to invest in each asset class based on their financial goals and investment strategy, he further said.

Minocha said these funds may suit investors who lack the expertise or do not want to manage asset allocation themselves, as they offer professional portfolio rebalancing through a single fund.

However, first-time investors should understand the scheme's underlying asset allocation, associated risks and tax implications before investing. Multi-asset allocation funds should not automatically be treated as low-risk products simply because they invest across multiple asset classes.

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How multi asset allocation funds performed in other horizons?

In the last three years, multi asset allocation funds gave an average return of 13.98%. Quant Multi Asset Allocation Fund gave the highest return of around 19.79% whereas Edelweiss Multi Asset Allocation Fund gave the lowest return of 7.14% in the same period.

In the last five years, they gave an average return of 11.86%. Quant Multi Asset Allocation Fund gave the highest return of 16.22% whereas Axis Multi Asset Allocation Fund gained the lowest of around 7.53%.

Minocha said because each asset class performs unpredictably, it is impossible to forecast the best asset; earnings growth may support equities, and gold can provide global protection for an investment.

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Industrial demand may support the case for silver, but the metal comes with a higher price for increased volatility. Most people considering multi-asset funds should view them as a way to supplement other investments, not a way to make quick returns, he further said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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