How Should a Newcomer Invest in Mutual Funds in UAE?

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It was once said by Scott D. Cook, mutual funds were invented to make investing easy, so customers would not have to be burdened with choosing individual stocks.

This is why investors, especially the ones starting their investment journey are willing to invest in mutual funds. This investment instrument helps investors create a financial collection and build wealth. 

Every investor, whether fresh or rusty, has some financial milestones that they want to cross within their desired period, they can be long term like planning for retirement, or for a dream house, or for a child’s further education, or they can be short term like planning for a dream holiday or buying a new car.  These financial milestones are personally important for every investor.

As an investor, in order to cross your desired financial milestones, you need to invest properly. This is because the amount that is invested and the manner in which it is invested determines the amount that you are expected to receive at the end of the investment tenure.

Furthermore, in today’s era where inflation is on a ride that is moving up the hill, everything has started to get expensive. Therefore, it is vital that you invest in an instrument that is new age like mutual funds. A mutual fund is a helpful instrument because it provides the investor with a wide range of opportunities that allow him/her to widen the scope of his/her investment.

Whether you are a kind of an investor who takes up an aggressive approach or an investor who prefers a moderate approach, or an investor who takes up a conservative approach, the mutual fund portfolio offers you diverse opportunities.

Mutual funds give the investor an option to choose the time horizon for their investment, which means you can either choose a long tenure to invest or a short tenure, and additionally you can also enjoy the freedom of choosing the amount for your investment which can be either a small amount or a large amount. You also have access to various schemes that are available under the different mutual funds in order to cross your desired financial milestone.

A financial goal is a form of a personal milestone one wishes to cross in life. Hence, it is important to invest in mutual funds that are the best option for your investment needs. Here are some of the most important milestones for an individual investor in his/her life along with the most suitable instrument that he/she can opt for in order to achieve the goal.

  • Child’s Marriage or Education: An investment for a longer term in balanced funds, index funds or gold funds.
  • Retirement Planning: An investment in an equity mutual fund that is well diversified for a long tenure.
  • Planning for Regular Pay-out: An investment in a systematic withdrawal plan that is offered under a mutual fund scheme.
  • Buying a Car, Financing a Holiday, or Renovating Your House: An investment for a shorter tenure in debt funds.

Keeping your financial goals in mind while investing is a perspective that is practical and that will get you a step closer towards achieving your milestones. If you are still not very sure or clear about how to achieve your financial goals, run the below-mentioned questions in your mind in order to obtain a clear picture of the means to achieve your financial goals.

  • What is my financial goal?
  • Am I saving enough to achieve the financial goal I have set for myself?
  • Have I covered my risk before planning for my financial goal?
  • What is the probability of achieving my desired financial goal?

If the answers that popped up in your head are more or less positive, it implies that you are headed on the right path for your investments and you shall hit your financial aim.

These questions not only help in setting the right pavement for the path that leads to the achievement of your goal but also help in monitoring your progress periodically.

Why Should a New Comer Invest in Mutual Funds?

Once you are clear about your financial goals, it is good to understand the advantages for you to invest in mutual funds.

Spread that Risk!

The biggest feature of a mutual fund is that it allows diversification, which means as an investor, you can invest in different companies, spreading the risk.

One thing that is certain when it comes to the capital market is –volatility! Investing in mutual funds allows you to spread your investments in different buckets. So if one of investment falls, there are others that may remain intact or even rise.

Therefore, investing in a portfolio that is well-diversified will help you as a shield against the risk involved in the capital market.

Lock Your Target

Regardless of setting financial goals, it is always a big plus point to set short term targets. This is because they help you in achieving targeted savings.

Short term targets help you as an investor to review your progress on a periodic basis and keep your savings on the right track.

Define Your Hunger

When you are about to invest in mutual funds, you should plan your hunger for your financial needs. it is essential for you to make sure that your investment portfolio aligns with your financial goals, that is whether short term or long term.


The risk factor involved while you invest in mutual funds is lesser because of the diversification of the investment portfolio, which binds the performance of your investments with the goals you have set. It is good to opt for financial advice, even if the risk is diversified.

Are You Ready to Ride The Path towards Your Milestone?

A mutual fund portfolio is an assortment of multiple investment instruments that are used for investing in mutual funds that help you in achieving financial goals. The ideal way of investing in mutual funds is by building the perfect mix of mutual fund portfolios.

The returns earned on the mutual fund depend on your entire investment portfolio’s performance and is not related to a single fund. Therefore, building the right mix of funds in your portfolio is important.

Here are some factors to consider as a newcomer while building your mutual fund portfolio.

The Purpose of Investing

Before you invest in mutual funds, it is essential for you to establish the purpose behind your investment. Being clear about your purpose will help in effective planning for your goals and milestones.

Choosing the Right Category

The category of a mutual fund is the type of fund you want to invest in to achieve your goals. There are numerous mutual fund instruments available in the market such as balanced funds, equity funds, index funds, etc.

Defining the type of mutual funds will help in shaping your investment strategy. Choosing the ideal category for your goals depends largely on the purpose of your investment.

Choosing the Right Fund

Once the investment category has been defined, it becomes easier to choose the right mutual fund for investing. This is because, by this step, you have defined your goal, the purpose for investing and the type of instrument to invest in.

Review and Rebalance

Last but not least, this is a very important step when you invest in mutual funds – keeping track of your investments. It is good to check on the performance of your investments every now and then as it helps in painting a clear picture. If the performance is not moving at the right pace for your set goals, you can rebalance your portfolio.

In a Nutshell

If you are yet to kickstart your journey on the path of investing, this article consists of an easy framework that will help you in getting a head start towards building wealth.

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