How to Invest in ETFs in Dubai?

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Are you wondering how to invest in Dubai using ETFs? If yes, this guide will explain to you why ETFs are a good option for investors in Dubai, how to invest in ETFs, among a few other things.

What is an ETF?

In recent years, one of the most important and valuable investment products created for individual investors in Dubai and the rest of the world are Exchange Traded Funds. ETFs offer a wide range of benefits to the investor, and if used wisely can turn out to be a great vehicle to achieving investment goals that an investor may have planned.

In brief, an Exchange Traded Fund is a basket of securities that you can sell or buy through a broker on a stock exchange. Basically, an ETF is an open-ended fund that is traded on a stock exchange.

Why Should You Invest in ETFs?

Unlike stocks, ETFs can be traded and sold at any time, even before the trading hours begin.

There are no minimum investments for these funds, which makes it more appealing to the investors in Dubai. It is a good bet for someone who is just about to start their investment journey, without having to face the fear of going all in.

What makes it even more attractive as an investment in Dubai is that it deals with foreign trade which means as an investor, it allows you to deal internationally. It definitely is exciting when you think that you can deal across the globe. Another perspective is that it helps in connecting our economies and making financial relationships with all types of countries stronger.

The value of your traded ETF will fluctuate throughout the day depending on the supply and demand at that particular time.

Are ETFs a Safe Bet?

No matter which investment vehicle you choose, there is always some degree of risk involved. You should be well aware of your risk appetite as an investor and choose an investment that is in line with this tolerance for risk and loss.

How to Invest in ETFs?

If you plan to move forward with the idea of investing in ETFs, you will have to choose a broker or a brokerage firm. It always a good idea to look for one that does not charge you any commission fee. This helps in going forward with your investments without paying any unnecessary additional charges and fees. Also, you should do thorough research regarding your choice of broker or brokerage firm, and make sure to ask around about their reputation and look into their background. It is always beneficial to learn about other customer’s reviews in order to avoid any future complications. There are some investment platforms that allow you to go through alone with the trade.            

Conduct Your Research First

You should invest your time in reading about the funds you are thinking of narrowing down. Keep in mind your financial and investment goals while doing this research and choose accordingly. You should aim at sticking to investments that hold a low expense ratio and have a good amount of assets. It would not harm you to have a look at the number of trades the ETF gets per day.

The Downside of Investing in ETFs

Like any other investment, ETFs also have some downsides to them. As an investor, it is important to keep these in mind before investing in them.

  • Trading Costs: If you prefer to invest small amounts on a frequent basis, there may be alternative methods that cost lower.
  • Illiquidity: There are some wide bid/ask spreads in some of the ETFs that are thinly traded. This means you may be buying at a high spread price and selling at a low spread price.
  • Error while Tracking: Generally, ETFs track the underlying index in a proper manner, but technical issues can lead to discrepancies.
  • Settlement Dates: Sale of ETF are settled after 2 days following a transaction. This means if you are a seller, the funds from your ETF sale are technically unavailable to reinvest for 2 days.

So…. Should You Invest in ETFs?

If done wisely, ETFs can be a very rewarding investment, especially if you are certain about what you are doing. Do your research and only make decisions depending on your life. Do not blindly follow what others around you are doing. You should always keep in mind, everyone has different needs and goals.

If you are opting for a broker, you should choose wisely, and be involved in a proactive manner.

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