What makes a multi-asset portfolio the ideal choice for a new investor?

In the world of 24-hour rolling news, it’s always easy to get caught up — and ultimately overreact — to market events. And let’s be honest, the news headlines that stick are normally the negative ones.

This is no different in the world of finance – the focus on the negative is palpable. So it’s perhaps no surprise that a recent survey found that 52% of Brits haven’t even considered investing in the past year*. Emotion is only one of the reasons for this; there is also a lack of knowledge, mistrust and a belief that investors need a lot of money to start investing at all.

The reality could not be more different – you can invest in small amounts and while there have been some negative stories, the vast majority of companies have proven themselves trustworthy over many decades.

Where to get started?

What is more off-putting is the lack of knowledge and the overwhelming choice available to investors. A Centre for Economics and Business Research poll found 73%* of Brits fell below an ‘average financial knowledge benchmark’.

With over 40,000 global stocks to choose from and around 4,500 UK listed funds, the overarching question for investors is where to begin? The sheer volume of choice is enough to put anyone off, let alone a beginner.

Suddenly you’re asking yourself: What if I make the wrong choice? Which sectors, regions and assets are best suited to me? What’s style bias? And how much risk should I be taking?

A simple solution: multi-asset funds

Step forward multi-asset funds. They differ from traditional funds by targeting a specific investment outcome, such as a return above inflation, rather than performance against a specific benchmark or index like the FTSE 100 (the largest 100 companies in the UK stock exchange) or the S&P 500 (the largest 500 in the United States).

Instead, the managers of these funds often have the flexibility to invest across asset classes, geographies, styles and other investment managers. The ultimate goal is to create a flexible range of investment instruments that can seek out growth opportunities as the market environment changes, while carefully managing risk.

Essentially, they take the decision of what and where to invest out of your hands, with managers having the potential to quickly adapt to markets as and when they need to. These funds can take different guises – some invest directly in stocks, while others build portfolios from other funds (this is called a fund-of-funds approach).

But the proof of the pudding is in the eating – and the diversification tools and risk management skills of these multi-asset portfolios has proven a big hit with investors over the past couple of decades, with many becoming the bedrock of an investor’s portfolio.

These vehicles do tend to cost a bit more than a typical active fund – but the additional oversight offered by the right manager usually makes it more than worth it.

Where can you find multi-asset funds?

The good news is there’s no shortage of multi-asset funds available – and a great place to start are the various IA Mixed Investment sectors.

There are four such sectors, with each dictating the minimum – and maximum – equity investments that funds must have to qualify for inclusion. They are: IA Mixed Investment 0-35% shares, IA Mixed Investment 20-60% shares, IA Mixed Investment 40-85% shares, and IA Flexible, which has no restrictions. IA Mixed Investment 40-85% is currently the most popular, with UK investors having committed £91.3 billion, according to recent data***.

The top ten performing Elite Rated multi-asset funds

The latest government data, covering the period from January 2024 to March 2024, shows that the average pre-tax annual salary is £35,464 in the United Kingdom across all sectors in England and Wales^. Assuming you’re setting aside 5% each year, or £148 a month, for five years, Orbis Global Balanced would have returned £12,472^^ — gains of £3,444.

Remember, there’s no such thing as a one-size-fits-all investment, but a multi-asset fund can be a shortcut for those looking to dip their toe into the world of investments. A multi-asset fund is an easy way to access a range of asset classes without the hassle of rebalancing and learning the ins and outs of asset allocation. A professional investor does all that for you.

*Source: First Sentinel Wealth Management, January 2024
**Source: fund factsheet, 30 April 2024
***Source: Investment Association fund statistics, September 2024
^Source: Average UK Salaries by Age and Occupation in 2024, 22 May 2024
^^Source: FE Analytics, total returns in sterling, 31 October 2019 to 31 October 2024