Mutual Funds are the ‘active’ element of an investment portfolio. There is a fervant ‘active vs passive’ debate globally at the moment and very bright people argue both sides of the coin. Ultimately, there are mutual fund managers that have beaten their passive benchmark consistently and there are those that haven’t. The market that they invest in is probably key.
Mutual funds aim to provide long term gains that grow your capital and reduce risk. The bulk of most pension and provident schemes are invested in mutual funds to give steady growth and to mitigate any risk. Risk is spread out over hundreds of different groups of assets or securities.
There are many different types of mutual fund categories to choose from depending on your level of risk and asset class interest e.g. emerging markets, new technologies, global equities etc.
If you would like further information on how you may be able to include mutual funds within your portfolio or perhaps the better options available at the moment then please do not hesitate to get in touch.
How do mutual funds work?
“A mutual fund pools money from different investors in order to invest in a large group of assets (also known as securities) such as stocks and bonds. Professionals manage the holdings that make up the fund’s portfolio; investors buy shares that rise and fall in value based on the performance of the funds underlying securities.” – (Nerdwallet.com)
“Mutual fund investors don’t actually own the stock in the companies the fund purchases, but share equally in the profits or losses of the fund’s total holdings – hence the ‘mutual’ in mutual funds.”
Any lump sum or monthly pension contributions are used to purchase more shares or units in the various funds, thus increasing its overall value.
Mutual funds are managed by full time expert fund managers, who reduce volatility and risk through diversification.
For more information on Mutual Funds as a resident in Dubai, please contact me by clicking below.