How to Invest in ETFs in Dubai (2024 Guide)

ETFs has become one of the most popular investment options for many people since it provides portfolio diversity, minimize the risk of putting the money in an individual stock, and provide investors with the flexibility of choosing the “theme” they are willing to invest in.

In this article, we will explain about ETFs and how to invest in ETFs in Dubai.

What is ETF?:

An exchange-traded fund (ETF) is a financial instrument that holds a basket of different securities like bonds, stocks, and commodities.

Think about it as a group of stocks, wrapped together and sold as one package. This package is the ETF, and the performance of the underlying stocks will determine that ETF’s performance.

ETFs can replicate a market sector such as real estate, reflect a financial instrument or commodity’s performance, such as bonds or gold, or replicate a specific index like the S&P 500.

For Example, if you’re willing to invest in the technology sector, but you’re not sure which stocks to pick, or you want to diversify your investment, you can buy an ETF that tracks the technology sector’s performance, such as SOXX ETF

Those types of ETFs hold stocks of multiple technology companies. By investing in one, you’ll get the diversification you seek as if you are buying all the stocks under that particular ETF.

Examples of Well-Balanced ETF Portfolios :

❖ High Risk Portfolio

• 80% Stocks
• 20% Bonds

Can be replicated with 4 ETFs:

50% Vanguard Total Stock Market (VTI)
30% Vanguard FTSE All-World Ex-US (VEU)
10% Ishares TIPs Bonds (TIP)
10% Vanguard Total Bond Market (BND)

❖ Medium Risk Portfolio

• 25% Stocks
• 50% Bonds
• 25% Gold

Can be replicated with 4 ETFs:

50% IShare 20+ Years Treasury Bond (TLT)
25% Vanguard Total Stock Market (VTI)
25% SPDR Gold Trust (GLD)

❖ Low Risk Portfolio

• 80% Bonds
• 20% Stocks

Can be replicated with 2 ETFs:

80% Vanguard Total Bond Market (BND)
20% Vanguard Total Stock Market (VTI)

If you want us to help you to build your own ETF Portfolio (Completely Free), drop us an email on 
info@thefinancedean.com

How to buy ETFs in the UAE:

If you are willing to invest in ETFs from UAE, you can either do it yourself through brokers, or through an expert financial advisor where you both discuss the strategy and theme you are willing to invest in.

1. Invest in ETFs by your own:

To buy ETFs in UAE by yourself, you must have an account with a brokerage firm registered with the exchange where you want to trade ETFs.

One of the most famous brokers to invest in stocks and ETFs in Dubai are:

• eToro our recommendation. Zero commission on buying stocks & ETFs, minimum investment for stocks and ETFs is $10 USD.
• Sarwa a UAE based investing platform, rapidly gaining popularity in the UAE market due to its user-friendly interface and the auto-investing option they provide, Click Here to read our personal review about Sarwa
• Saxo Bank requires a minimum investment of $10,000
• Interactive Brokers Very popular internationally, but not in the UAE, however, it’s still one of the most trusted brokers globally.

Disclaimer: Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees.

2. Invest in ETF through a Financial Advisor

If you don’t know how to do it yourself, or you don’t have the time to research and monitor the news and markets, you can use the help of a financial advisor. It’s their job to be always updated with market trends and potential opportunities. You will explain to them your goals and risk appetite, and they will create an ETF portfolio for you and they’ll review it periodically with you.

You can do your own research to find the best financial advisor in UAE. Also, you can check our recommended list. We chose this list carefully based on popularity, good reviews, the strength of the companies they work for, and the range of products and solutions they provide.

Why invest in ETFs in UAE?:

•  Cost-effective: 

Buying ETFs is a cost-effective method of investing in different stocks or underlying securities.  

Suppose you want to invest in the S&P 500 stocks and replicate the S&P 500 index returns; you will need a large sum of money to allocate your cash to purchase hundreds of different stock types. In contrast, by investing in one of the ETFs that track the S&P 500, such as SPDR S&P 500 (SPY) or Vanguard 500 Index Fund ETF (VOO), you can replicate the performance of that index.

Many mutual funds charge you a sales load each time you invest in them. However, when you buy ETFs, no sales load is charged, making it a cost-effective option compared to mutual funds. 

However, there would still be a cost to trade ETFs, and they are not completely free. This cost differs from one ETF to another, and you can review them on the ETF factsheet.

•  Easy to trade:

Not only are ETFs cost-effective, but they are also easy to trade. You can buy and sell them as frequently as you like, just like stocks. 

You can also perform all sorts of technical and fundamental analysis on the ETFs the same way you do on stocks.

•  Diversification:

One of the best advantages of ETFs is the diversity that you get when investing in them. 

By investing in one ETF, you can get exposure to commodities, indices, currencies, foreign markets, foreign companies, etc. 

Such diversity reduces the portfolio risk and makes it less volatile.

 Best Trading Platforms in the UAE

Possible Downsides of ETFs:

Although ETFs provide numerous advantages, investors should be aware of the following dangers when using them:

• Market Risks:

ETFs can experience rapid price fluctuations, leading to volatility in your investment value.

• Liquidity Risks:

It may be difficult for some ETFs, particularly those with lower trading volumes, to buy or sell at the appropriate prices rapidly.

• Over-diversification Risks:

Broad-market ETFs might include underperforming assets, potentially leading to diluted returns.

Click Here to Invest in ETFs from UAE

Bottom Line:

ETFs have been growing in popularity, with a growing number of investors adding them to their portfolios because of the many benefits they offer. Many types of ETFs are available to investors, which investors can buy to get exposure to different assets cost-effectively.