September 24, 2023

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Five steps to jumpstarting your investment portfolio with liquid mutual funds

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5 steps for a profitable mutual fund investment | The Financial Express

Investing in mutual funds can be attractive for those looking to jumpstart their investment portfolios. Liquid funds in the UAE are a type of mutual fund that usually invest in money market instruments such as Treasury bills, certificates of deposit and commercial papers. They are considered liquid investments because investors can redeem or sell their units at any point without incurring any transaction costs. This article will discuss five steps to jumpstarting your portfolio with liquid mutual funds.

Research the different types of liquid funds available

The first step is to research the different types of liquid funds available. These funds have many categories, including short-term, ultra-short-term, low-risk and high-yield options. Understanding the risk/reward profile associated with each type of fund is essential before making a decision.

Consider the expense ratio

The second step is to assess the expense ratio of any liquid funds you’re considering investing in. Expense ratios are fees mutual funds charge annually, ranging from 0.1% to 2%. Higher expense ratios may mean lower returns for investors, so choosing funds with reasonable expenses for your portfolio is essential.

Investigate the performance history of the fund

The third step is to investigate the performance history of potential liquid mutual fund investments, including the fund’s past returns, volatility, Sharpe ratio and other metrics that provide insight into how well it has performed over time. The manager’s track record is also essential as it can help investors determine how experienced and successful the fund manager is.

Analyse your risk tolerance level

The fourth step for jumpstarting your portfolio with liquid mutual funds is to analyse your risk tolerance level. Liquid mutual funds are generally lower-risk investments than stocks, but risks are still associated. Understanding how much risk you’re comfortable taking before making any decisions is essential.

Diversify your portfolio by investing in multiple liquid funds

The fifth and final step is diversifying your portfolio by investing in multiple liquid funds. This strategy helps reduce overall investment risk because of the diversification benefits that come from having a variety of investments in your portfolio. It also ensures that you’re not putting all your eggs in one basket, which is essential for long-term success.

How to start trading in liquid mutual funds in the UAE

In the United Arab Emirates, liquid mutual funds offer a lucrative opportunity for investors to diversify their portfolios. There are several ways of trading in liquid mutual funds, each with advantages and disadvantages.

For those who prefer to manage their investments, buying liquid mutual funds through a brokerage account is the most accessible option. Investors can open an account through an accredited broker, deposit funds into the account, and then purchase units of the chosen fund. These transactions are typically low, but administrative fees may be associated with opening and managing the account.

Another option for trading in liquid mutual funds is through a platform such as Al Marjan Invest Gateway or MyInvestmentUAE. These platforms allow traders to access a wide range of investments from different fund managers in one place. Most also provide detailed research on various investments, allowing traders to decide which ones to choose. The fee structure for using these platforms varies by provider; some charge no fees, while others have commission-based structures that depend on the type and amount of investment made.

Finally, investors in the UAE can also purchase liquid mutual funds in the UAE directly from fund managers, allowing them to build a relationship with the manager and gain access to personalised advice and information on how best to invest their money. However, this method comes with a range of transaction costs that must be paid upfront; these include brokerage fees, sales commissions and other charges associated with purchasing units from a fund manager.

The final word

Investing in liquid mutual funds in the UAE offers many potential benefits for diversifying their portfolio or adding more liquidity to their investments. With careful research into available options and an understanding of the associated fees and risks, traders can use these products as part of a successful long-term investment strategy.

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