How to Build an Ideal Mutual Fund Portfolio in UAE?

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First things first – in case you are wondering what exactly a mutual fund portfolio means, in layman’s language, a portfolio is a combination of different financial assets such as stocks, bonds, mutual funds, etc.

In order to hold a successful mutual fund portfolio, the essential component to consider is diversification.

In order to make things clear – diversification does not mean separating the different mutual fund schemes that you have invested in up until now. Diversification is perfection in which your funds in the mutual fund portfolio remains unaffected even in case of an economic slump. This would help you increase your potential returns and reduce your potential risk.

 Have you ever heard the saying – ‘Do not put all of your eggs in a single basket’? This goes hand in hand with the concept of building the ideal mutual fund portfolio. So if you are following this ideology, you would be successful in building a good investment portfolio for your mutual funds.

It is important for you to compare the mutual funds available in the market and create a customized investment portfolio consisting of the best performing funds as per your appetite for risk as an investor.

There are several mutual fund providers in the market, which may leave most of us baffled by the available options and about how to move on to create the ideal investment portfolio.

Factors to Consider While Creating a Mutual Fund Portfolio

Here are some factors which you should consider while creating your ideal portfolio of mutual funds:

Time Horizon of Your Financial Goals

Before you move ahead with the comparison between the mutual funds available in the market, it is good to be aware of the time horizon of your financial goals. You can have a shorter time horizon or a longer time horizon. This tenure helps in determining your risk appetite for the investment.

Creating a Link between Your Goals and Funds

Ideally, your next step should be to map out the top-performing mutual funds in order to meet your long-term and medium-term financial goals.

Core and Satellite Portfolio

The core portfolio is to be invested in the mutual funds that are the top performers as per your long-term and short-term financial goals.

The satellite portfolio is to be invested in equities and debts that are riskier in order to achieve additional gains.

Tolerance for Risk

Risk tolerance is more important as compared to risk appetite for an investor. The risk tolerance depends on a variety of factors such as your income level, age, the liabilities and assets you hold, your dependents, among other factors. 

Combination of Fund Categories

When you are aiming to create a portfolio with the mutual funds that are amongst the top performers in order to achieve your financial goals, it is good to keep the risk-reward aspect of the investment in mind.

Rebalance and Review

It is essential to constantly review your investment portfolio and rebalance it in case any of the funds are falling below your expectations in terms of performance.

Which Mutual Fund to Pick?

Once you are sorted with the factors to be considered while building your ideal portfolio, comes this big question – which mutual fund to pick?

Largecap, Midcap, or Smallcap?       

If you compare by nature, then large-caps are more stable in comparison to the mid-caps or small-caps. In a situation when the market starts to pick up, mid-cap funds will be the ideal choice as they tend to outperform the large-cap funds.

However, while building the ideal investment portfolio, your risk tolerance is more important than the nature of the fund.

Does the Size of the Mutual Fund Matter?

When it comes to studying a mutual fund, it is more important to consider the track record of the fund and not the size of the fund.

The top-performing funds are the funds that have proved to have consistent past performance in both the rising markets and the falling markets.

Strategies to Adopt While Choosing a Mutual Fund

Due to the wide availability of options in the market, it is quite likely for you to get confused while choosing the mutual fund best for you.

However, before studying the top-performing funds for your investment portfolio, it is important to consider the basic factors such as the investment horizon and risk tolerance.

Beyond these primary factors, there are more factors to keep in mind:

Risk Profile

Your ability and willingness o take on risk decides the choice of the best mutual funds for your investment portfolio. If you are an investor who prefers a conservative approach, you can consider the option of large-cap funds as they are more stable in both rising and falling markets. However, for an investor who prefers an aggressive approach, mid-cap and small-cap funds are the best funds for investment.

Time Horizon

Along with your investment approach, the time horizon for your mutual fund investments also plays a role in deciding the best funds for you to invest in.

Expense Ratio

The expenses needed to manage and operate a mutual fund also known as the expense ratio is lower for large-cap funds because the expenses are spread over a large base of assets as compared to small caps or mid-caps. Therefore, while comparing funds it is important to consider the expense ratio.

New vs Experienced Investors

If you are a newcomer, then large-cap funds would be the ideal funds to invest in because the volatility involved in such funds is less compared to small-caps or mid-caps.


If you are just starting your investment journey, then it is a good idea to consider choosing from the top-performing funds in the multi-cap category.           

Multicap funds are the ideal option of mutual funds in the long term for investors who are moderate.

Are You Ready to Create Your Ideal Portfolio?

While creating your ideal mutual fund portfolio with the top performers, you should always remember that it should be customized as per your long term and short term goals along with your risk tolerance.

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