Saving through mutual funds has risen in the recent past, especially among people who have aimed at growing their wealth but do not want to take high risks. The prospect of a mutual fund market in the UAE has been opened to cater to each business need in the market.
For example, if you are a practitioner who invests in mutual funds or just a layman who is practicing this area, it is good to know how mutual funds work in the UAE.
This blog will help you gain more information about mutual funds UAE, the advantages of investing in mutual funds UAE, different categories of mutual funds as well as how to invest in mutual funds at the moment.
What Are Mutual Funds?
A mutual fund is a type of investment whereby people contribute their money together for purchasing investment securities such as stocks and bonds, amongst others. It is due to this diversification that risk is distributed and therefore the returns might improve as time goes by.
Why Investing in Mutual Funds in UAE?
The following are the merits of investing in mutual funds:
Here are some key benefits:
Diversification: Mutual funds buy different securities thus cutting risks that are associated with investment in one security.
Accessibility: This proved to be a fact given that there are mutual funds in UAE that are designed for small investors and those that cater to large investors as well.
Liquidity: This means that most mutual funds enable investors to purchase and sell shares on any business day and this is an advantage if one wants to invest in the business world.
Cost Efficiency: The expenses involved in managing mutual funds are shared among all the ticket holders thus making it cheaper for investors to invest in a mutual fund as a diversified portfolio.
The Types Of Mutual Funds in the UAE
UAE presents to its investors an extensive list of mutual funds depending on the investment plan and risk profile.
Here are the main types of mutual funds available:
Equity Funds: These funds’ main role is to invest in stock and it’s suitable for long-term investment purposes. The profit that you can get is normally higher than that of the lower-risk shares.
Bond Funds: Other types of mutual funds are called fixed-income funds that invest in government or corporate bonds. Standard funds are relatively less dangerous than equity funds and offer income in a steady manner.
Balanced Funds: Money is invested in the organized stock market which is categorized as equities. While some part of the money is invested in bonds. This is not very risky as compared to investment in equities.
Money Market Funds: Such funds pay for short-term and high-quality money market instruments such as Treasury bills and Certificates of deposits. Some of them have relatively lower risks and this makes them suitable for those who prefer low-risk investment.
Shariah-Compliant Funds: For those investors who wish to invest under the guidelines of Shariah then they can invest in mutual fund companies that offer Shariah-compliant mutual funds. These funds do not invest in companies that are known to be prohibited in Islamic law such as the production of alcohol, gambling, etc…
How to Invest in Mutual Funds in the UAE
Mutual fund investment in UAE is not a complicated affair and is explained below. Here’s how you can get started:
Here’s how you can get started:
Determine Your Investment Goals: The first thing that any investor is expected to comprehend before entering the market is one’s investment objective, tolerance to risk, and time horizon. This will enable you to select the most suitable type of mutual fund.
Choose a Fund: After understanding investment goals you have to invest in a mutual fund that is relevant to the set goals. Things that should be paid attention to the accomplishments of the fund. These included; the fees charged, and the track record of the fund manager.
Open an Investment Account: It is always advised to acquire mutual funds through banks or brokers or more directly from the fund houses in the UAE. To invest in funds, you will need to open an investment account. It will enable you to purchase and sell the shares of the funds.
Start Investing: When one opens an account, this means that they can now invest in the mutual fund by buying the shares into it. The investor should always invest in the plan frequently. Perhaps through a Systematic Investment Plan (SIP) so as to capture the benefits of a dollar-cost averaging strategy.
Monitor Your Investment: Take time and look at mutual fund performance, subsequently. Maintain this objective by making necessary adjustments to the mutual fund as per the financial objective at hand.
Conclusion
Mutual funds are one of the ways to diversify one’s investment portfolio. Also, it is a suitable method of attaining one’s financial objectives while taking advantage of professional services in the UAE. Many types of funds choose from investors can easily find mutual funds. They feel comfortable with given their risk profiles and/ or investment goals.
We must be cautious and know all the pros and cons, seek the expert opinion of the financial planner. Now you know that there are certain limitations to investing in mutual funds in the UAE. With the right decisions, you can trigger the most with the given product.
Frequently Asked Questions About Mutual Funds In UAE (FAQ’s)
Q: Are non-residents allowed to invest in mutual funds in the UAE?
A: Yes, residents are also free to invest in the mutual fund via the UAE market. Most of the global and regional banks together with those investment companies provide their services to foreigners.
Q: Is there a minimum investment amount that is allowed when it comes to mutual funds in the UAE?
A: Here it is possible to state that the minimum investment amount differs from fund provider to fund provider. Some of the funds may have low requirements that an investor needs to put in. While others may need the investor to deposit more capital.
Q: What are the costs related to the mutual fund?
A: Mutual funds come with management fees whereby the fund manager is paid depending on the size of the fund. There may also be other costs and charges which include entry or exit fees, depending on the fund.
Q: What is needed to be implemented in order to monitor the performance of your mutual fund?
A: The majority of the fund suppliers provide internet portals through which you can monitor the performance of your investment. Further, the reports on the performance of the funds are often found to be presented and issued at intervals.
Q: Can you also lose money in mutual funds?
A: Yes, unlike other forms of investments people are also bound to lose their money in mutual funds. Your investment can either gain or lose its worth in ratio to the fluctuations in the market.
