Risk considerations
Investors should note that the Xtrackers ETFs & ETCs are not capital protected or guaranteed and investors in each Xtrackers ETF or ETC should be prepared and able to sustain losses up to the total capital invested. The value of an investment in an Xtrackers ETF or ETC may go down as well as up and past performance does not predict future returns. Investment in Xtrackers ETFs or ETCs involve risks. For a list of related risks please click on the Risks and Terms tab.
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Broad diversification
across multiple asset classes
Return potential
from different portfolio building blocks
Cost-efficient
“all-in-one solution”
for long-term wealth building
Multi‑asset investing is like a roof supported by several pillars rather than just one. Each pillar carries part of the load: equities can offer growth potential, bonds can provide income potential, real estate can add portfolio resilience, and commodities can enhance diversification. If one pillar weakens, others may help keep the roof firmly in place. The result is a more robust portfolio designed to navigate different market environments over time. It is also important to note that while multi-asset ETFs seek to provide diversified exposure across different asset classes, investments can fall as well as rise in value and investors may get back less than originally invested.
What is multi-asset investing?
Multi-asset investments – often referred to as diversified or balanced funds – combine multiple asset classes within a single product, such as equities, bonds, commodities, real estate, and money market investments. The goal of multi-asset mutual funds or multi-asset Exchange Traded Funds (ETFs) is to diversify risk and achieve more consistent long-term return potential compared with a single asset class strategy, which focuses on just one type of investment, such as equities or bonds. This is achieved by combining investments that behave differently across market cycles.
Asset classes within a multi‑asset portfolio
Equities
Equities often make up the return‑oriented component of a multi‑asset portfolio. They provide long‑term growth potential but also involve higher risks, as equities can be more volatile. In a broadly diversified ETF, this risk can be mitigated through diversification across different sectors and regions.
Bonds
Bonds, such as government bonds or lower‑risk corporate bonds, typically help balance portfolios and generate income. They often exhibit less volatility than equities and can help smooth equity fluctuations during turbulent market phases. Government bonds are generally regarded as defensive, while corporate bonds may offer higher income potential with varying levels of risk – such as the risk that the company issuing the bond may not be able to make interest payments or repay investors in full. Within an ETF, combining bonds of different credit qualities can contribute to additional balance and potential return opportunities.
Commodities
Commodities such as precious metals, agricultural commodities, and energy resources can be another building block of multi‑asset investments. They can enhance diversification and may help in inflationary environments. With supply constrained, prices can be particularly sensitive to shifts in demand and money supply growth. In addition, commodities generally exhibit a low correlation with equities and bonds[1], which can enhance diversification and help reduce overall portfolio risk. At the same time, commodity investments can be subject to significant price fluctuations due to things such as geopolitical events or weather conditions. Commodities can be added via broadly diversified indices or selectively, for example, through gold investments such as ETCs.
Real estate
Real estate can offer additional diversification and income potential. Access is often gained via listed real estate investment trusts (REITs), which may benefit from long‑term rental and lease income and, over a sustained period of time, often behave differently from equities[2]. However, REIT investments are also subject to risks, such as changes in interest rates, vacancy rates, or declining property valuations. Depending on their focus, REITs can differ significantly—by property type (for example residential, office, logistics, or specialised real estate)—which may enable additional diversification.
Liquidity
Liquidity in the form of money market investments or money market‑related positions provides flexibility and resilience during volatile periods. As a tactical reserve, liquidity can enhance a portfolio’s ability to adapt.
Multi‑asset strategies
The art of multi‑asset strategies lies in the weighting of the individual asset classes. Asset allocation depends on investment goals, time horizon and risk tolerance. If you plan to invest for the long term and are comfortable with market fluctuations a growth focused strategy allocates more to equities. If you prefer a more defensive approach, the strategy would then allocate more to bonds. Other asset classes are used as diversifiers.
Portfolio allocation ideas for different types of investors
| Investor profile | Equities | Bonds | Additional assets |
|---|---|---|---|
| Defensive | 30–40 % | 60–70 % | optional 5–10 % Commodities/REITS |
| Balanced | 50–70 % | 30–50 % | optional 5–10 % Commodities/REITS |
| Growth focused | 80–90 % | 10–20 % | optional 5–10 % Commodities/REITS |
Allocation based on Modern Portfolio Theory (Markowitz) and established educational models (CFA curriculum).
How do multi‑asset ETFs work in practice?
Multi‑asset ETFs combine different asset classes within a single product, enabling broad diversification with just one investment. Many of these multi-asset solutions follow an “ETF of ETFs” approach: instead of investing directly in individual securities, they bundle several ETFs into an umbrella structure. The asset allocation – that is, the strategic mix of equities, bonds, or commodities – is clearly defined and is regularly adjusted to its target weights through rebalancing.
Example portfolio weights from risk-averse to growth‑focused
Defensive
Balanced
Growth focused
What is rebalancing and how does it work?
Market movements can change asset weightings over time. When one part of the portfolio performs better than the rest, its value increases disproportionately, causing its weighting to rise while the relative shares of the other positions decline. This effect can be particularly pronounced during periods of strongly rising equity markets. Market movements can change asset weightings over time. Rebalancing restores the original target allocation by reducing overweight positions and increasing underweight ones.
If, for example, the equities portion of the portfolio experienced strong price gains, then part of these positions would be sold and profits are realised. The capital released is then used to increase allocations to those asset classes that are below their target weight. In this way, the portfolio’s risk structure remains consistent over the long term and the original strategy is preserved. In a multi asset ETF, rebalancing is typically implemented at the index or fund level, depending on the specific product structure. Adjustments are usually made on a quarterly or semi annual basis.
Why invest in multi‑asset ETFs?
The more diverse and volatile the market environment, the greater the potential benefits of a well‑designed allocation across multiple asset classes. Multi-asset ETFs combine diversification, efficiency and simplicity in one product, making them an effective way to invest for the long term. The following points illustrate why this concept can be compelling.
1 Broad diversification
Combining multiple asset classes can reduce reliance on any single market segment, making investments generally less sensitive to short‑term market turbulence. Diversification may help reduce the impact of losses by spreading investments across different asset classes, so weaker performance in one area may be partly offset by stronger performance elsewhere, although losses can still occur. In this way, a structured and broadly diversified investment approach can be implemented without the need to select and continuously manage multiple individual products.
2 Long‑term risk management
Routine rebalancing helps maintain a consistent risk profile. Within a strategic target allocation, the portfolio is regularly adjusted automatically. Rebalancing ensures that shifts caused by market movements do not permanently alter the portfolio structure. As a result, the intended risk profile may be maintained over the long term, even after periods of heightened market volatility. The aim is to support disciplined, transparent, and well‑planned investing over time.
3 Cost efficiency
Multi‑asset ETFs offer a cost‑efficient way to gain exposure to multiple asset classes through a single product. This can reduce the need for multiple transactions and management costs. Lower ongoing costs can have a positive impact on returns and, especially over long investment horizons, may make a meaningful contribution to wealth accumulation.
4 Ease of investing
A multi‑asset ETF provides a straightforward entry point into long‑term investing, as a single investment bundles multiple asset classes from the outset. This creates a broadly diversified core portfolio and can reduce complexity and time commitment. Multi asset solutions are suitable for both one-off investments and regular savings plans. Combining diversification with opportunities for growth can help build wealth steadily over time without the need for frequent investment decisions.
What are the risks of multi‑asset investments?
Multi‑asset investments still carry risk. Performance can be affected by market conditions, interest rates, inflation and asset-specific risks. Even broadly diversified portfolios react to market movements: in periods when both equities and bonds come under pressure, multi‑asset ETFs may lose value, even if their structure is designed to provide balance. Persistently elevated inflation can erode real returns, while rising interest rates can weigh on bond prices by making newly issued bonds more attractive to investors. In addition, individual asset classes are subject to specific risks: commodity prices can be highly volatile, while REITs may be exposed, among other factors, to interest rate, market, and property‑specific risks. Although automatic rebalancing provides structural discipline in multi‑asset investments, it may, in certain market phases, lead to adjustments at unfavourable times. Currency effects can also influence short‑term performance.
Exploring the potential uses of multi-asset ETFs
| Key Features | Points to consider | Core questions | Profile |
|---|---|---|---|
| Bundling: Combining multiple asset classes with different weightings in a single product. | Predefined allocations between asset classes such as equities and bonds can reduce decision‑making effort, but they also can limit flexibility. | "Should investors set the allocation of different asset classes themselves, or opt for a predefined allocation?" | Potentially for beginners seeking simplicity. |
| "All‑in‑one solution": A balanced mix of asset classes – such as equities and bonds – based on a strategic target allocation. | A mix of different asset classes with predefined allocations, combined with rebalancing, can keep a portfolio aligned with its intended level of risk. However, automatic weighting may, in certain situations, conflict with an individual market view. | "How much time can realistically be dedicated to managing a portfolio?" | Potentially for time-constrained investors. |
| A range of multi‑asset strategies: allocations tailored to investment goals, time horizon, and risk profile. | Depending on the investment horizon and risk appetite, different allocations – for example between equities and bonds – can offer return potential, which is why a fully equity‑based allocation is excluded. | "What long‑term risk level is acceptable, and what corresponding allocation between equities and bonds seems appropriate?" | Potentially for investors with a balanced risk profile. |
| Eligible for both one-off investments and regular savings plans: Combining diversification with return potential. | Predefined multi‑asset strategies are suitable both for lump‑sum investments and for savings plans. | "Is regular investing planned, and at what intervals should a review or adjustment take place?" | Potentially for investors looking to build wealth through regular investing. |
How to invest in multi-asset ETFs
Getting started can be straightforward: multi‑asset ETFs can be bought like any ETF either as a one‑off investment or via savings plan – depending on what best suits your situation. Both options are available through many brokers, provided the specific product is offered on the platform.
Here you can find plenty of information about our Xtrackers multi‑asset ETFs:
Xtrackers Diversified Portfolio Equity ETFs Xtrackers Portfolio ETFs
Q&A with the product manager
Are multi-asset ETFs a new concept?
The idea of combining equities and bonds predates Markowitz’s modern portfolio theory of the 1950s[3]. And it has proven highly successful: by 2025, the European multi-asset fund segment had grown to more than €3 trillion in assets[4]. Today, however, the building blocks have become more cost-effective and diversified thanks to the use of core ETFs. So the concept itself is not new – it’s simply much easier and more efficient to implement.
How well can multi-asset solutions perform during market crises?
Multi-asset solutions do not provide complete protection during market downturns, but diversification can help cushion losses. Our historical analysis[5] covering the past 25 years found that adding just 15% bonds and 5% gold to a portfolio of global equities reduced volatility and helped portfolios recover more quickly following periods of market stress.
Do multi-asset ETFs always focus on equities, bonds and gold?
Not at all. Multi-asset strategies can include a much broader range of investments. Depending on the approach, they may also incorporate industrial or agricultural commodities, for example. One well-known example is the Bloomberg Commodity Index, which includes not only gold, energy and industrial metals, but also futures on livestock, among other commodity exposures.