All about Mutual Funds in UAE for Young Investors

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Being a young investor, it is crucial for you to consider the best available options for investment in the UAE, or anywhere else in the world. Mutual funds in UAE are considered to be the best to buy. Here’s how…

It is essential for you to have a significant amount of savings at your disposal in order to begin your investment journey. Your savings must be sufficient for at least six months. This should be your emergency fund. You should be at peace with the fact that if something were to happen to you, you have enough savings to cover the potential expenses.

Mutual funds in UAE and for that matter, anywhere across the globe, are considered to be the best suitable option for investors that are aged between 20-30 years. As we have all heard, the younger you start investing, the better will be your returns. This is true in the case of mutual funds. When you invest at an early age, you have a longer time horizon at your hand. This helps in earning higher potential returns and gives you enough time to recoup any losses that may occur.

Therefore, it is essential for you to invest as soon as you start to earn a stable income, or once you have put enough towards your emergency fund.

Types of Mutual Funds

There are three common types of mutual funds in the market, they are as follows:

Equity-Based Mutual Funds  

These kinds of mutual funds primarily comprise of stocks and shares of corporations or institutions along with other equity-related instruments. The risk involved in these funds is high but the potential returns tied to them are also higher.

Debt Based Mutual Funds

These are mutual funds that primarily comprise of bonds, debts and other debt instruments issued by the government. They are a preferred choice for investors that fall under the risk-averse category.

Hybrid Mutual Funds

These kinds of mutual funds have investments in both, bonds and equities. There is diversification of risk involved that helps in balancing out the market volatility.

Why Are Mutual Funds in UAE Good For Young Investors?

Here are some of the benefits of investing in mutual funds in UAE if you are a young investor.

Easy and Convenient

Being an investor, mutual funds don’t require you to be well aware of complex financial concepts in order to invest in them. A group of financial experts manages the mutual fund on your behalf. Mutual funds are also easy to research, study and subscribe to. It is as simple as visiting the website of the top-performing mutual fund in order to purchase the desired number of funds.  Other details such as the fund manager, the fund performance, rate of return, NAV, etc. can also be accessed easily. 

Low Risk

The diversification of investments involved in mutual funds in UAE help in mitigating the risk to different sectors of the market. There are 3 common types of mutual funds, discussed previously. Since there is diversification of risk, mutual funds are safer to invest, especially if you do not know the functioning of the stock market. 


Mutual funds do not require the investor to start with a large sum of money. You can opt for a systematic investment plan or SIP that allows an investor to start with a very low amount, on a monthly basis over a long period, which helps you to be less susceptible to market risks.

5 Things Young Investors Should Keep in Mind Before Investing in Mutual Funds in UAE

Here are 5 things you should keep in mind as a young investor before investing in mutual funds in UAE:

Definite Purpose

If you want to gain from mutual funds, it is important to invest with a certain purpose. For instance, one may wish to save towards a financial goal such as buying a home, planning for a child’s education, for a wedding, retirement, etc. Such financial goals help in making dedicated savings towards your short and long term goals.

Holding Duration

As a young investor, it is important for you to know the holding period for the type of mutual fund you are seeking to invest in against your financial goal. Each mutual fund category has a different risk associated depending on the holding duration. It is possible to end up losing money instead of making good returns if the benchmark time horizon is not matched.

Power of Compounding

The biggest advantage among young investors is that they have a longer time in the market, which leads to a less risky investment because the corpus created can generate over a certain time period. This is because of the power of compounding.

Market Risk is Involved

Mutual funds are considered to be a safer investment as compared to the other options in the market. However, it is important to remember that all investments are subject to market risk. You should always be clear about the scheme that you choose for investment by doing thorough research before going forward with the investment.

Benefits of Systematic Investment Plans

There are two ways by which you can make an investment in mutual funds in UAE. It can be either as a lump-sum amount where you invest your money in a single go and depend on the market timing, or there is another mode known as the systematic investment plan, also popularly known as SIP, where you can invest your money on a monthly, quarterly, or weekly basis as per your preference. SIP does not require market timing and helps in a disciplined investment approach which in turn becomes less risky overall for the young investors who wish to start their investment journey towards their long term goals.

The Bottom Line

It is important to have the basic knowledge of investing in mutual funds in UAE, along with a proper study and research before going forward with the investment in any fund.

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