Amid Trump tariff storm, should you pick multi-asset, sectoral or flexicap mutual fund?

Where to invest post Trump tariff expansion?

US President Donald Trump’s August 6 order imposing an additional 25 percent “Russia penalty” on Indian goods in addition to the existing 25 percent tariff has investors jittery about the fallout on the Indian economy.

Amid this uncertainty, investors are reassessing their portfolios. Experts advise staying anchored to long-term asset allocation plans amid market volatility, while deploying fresh investments in a staggered manner.

“Flexi-cap funds can be a good core holding, given their ability to dynamically shift across market caps,” said Rajul Kothari, Partner at Capital League, a Gurugram-based private wealth management company.

For lump-sum investments, hybrid funds such as balanced advantage funds, multi-asset funds and equity savings schemes offer a more measured approach by blending equity, debt, and sometimes gold. These strategies not only help manage risk but also provide relative tax efficiency compared to traditional fixed-income options, Kothari said.

Sector-specific funds, while attractive to some, require caution. They may not be suitable as core holdings due to their cyclical nature, Kothari said.

“In lieu of taking a sectoral call every now and then may not be very tax efficient. We like ICICI Prudential's thematic advantage fund, which is a fund of funds where the fund manager keeps reducing and increasing rates to various sectors, depending on the view. This is done with great agility,” she said.

Vishal Bajaj, executive director at Client Associates, agreed with Kothari. "While large-cap, diversified firms offer a lot of comfort and stability in the current volatile environment, one can also look at sectoral funds investing in banking and financial services. These themes are relatively insulated from the direct impact of ongoing tariff-related headwinds," he said.

As Trump tariffs upend global trade, which is also faced with growing geopolitical tensions, experts also favour increasing allocation to gold and silver for hedging.

However, this doesn’t mean rushing into physical gold or only buying gold ETFs. “It can be done in two ways – directly purchasing the commodities ETFs or indirectly taking an exposure through multi-asset allocation funds. My preference would be for the latter,” said Rajesh Minocha, CFP and founder of Financial Radiance.

Multi-asset funds offer better flexibility and risk management since fund managers can dynamically allocate across equity, debt and commodities while ensuring a minimum 10 percent in each.

“These funds impart diversification within themselves, which cushions the portfolio’s volatility and suits an investor with moderate risk. During highly volatile periods, these funds have an advantage to smooth the ride without requiring the investor to spend time on rebalancing on his own,” Minocha said.