GACHAGA: Investing in mutual funds not just for tycoons, give it a try

Let’s get something straight: investing is not just for suit-clad billionaires on the 62nd floor of a glass tower. You do not need a Rolex, a private banker or a yacht in the marina to start building wealth. And you certainly do not need to download an app that screams every time Tesla’s stock twitches.

In this article, lets zero in on mutual funds…globally recognised, expertly managed, and now more accessible to retail investors globally as well as in the UAE than ever before.

A mutual fund is like a financial potluck, you and a bunch of other investors pool your money, and a professional fund manager goes out to the markets to cook up a well-balanced portfolio on your behalf. The goal? Diversify across different assets and regions so your money has a better chance of growing over time without being exposed to just one company, sector or market.

Some of the top global names you will find managing mutual funds globally and also available in the UAE include Allianz, Franklin Templeton, BlackRock, Schroders and BGF (BlackRock Global Funds). These fund managers run both regional and international portfolios that you can access through local banks or DIFC investment platforms.

Each of these managers has their own investment strategy, some focus on emerging markets, others on US tech giants and some even on specific themes like healthcare or climate change. What they all offer is professional portfolio management.

How do they work?

You choose a fund based on your investment objective be it growth, income or capital preservation. Most banks (well, at least the ones that actually listen to their compliance officers) will ask you to fill out a suitability and appropriateness assessment.

Sounds fancy, but it's just a check to make sure your risk appetite, investment horizon and financial situation match the product you are getting into. In plain speak, they don’t want you jumping into a high-risk tech fund if your heart rate spikes every time the market dips two per cent.

It's about protecting you from yourself and from overzealous salespeople with monthly targets.

The fund manager backed by deep research, years of market experience and a fiduciary duty to act in your best interest, does more than just shuffle numbers. This is not your cousin’s WhatsApp stock tip or a gut-feel bet based on barbershop rumours.

Unlike DIY investing, where decisions are often made on impulse or hearsay, a professional manager spreads your money strategically across assets like stocks, bonds or cash equivalents. Over time, the fund generates income or grows in value (and on good days, both). That growth is passed on to you through capital gains or dividend distributions without you having to lose sleep over charts, cycles or CNBC.

Enter index funds (your low-cost investing buddy)

If mutual funds are the potluck, index funds are the buffet with a set menu and a discount coupon.

Index funds are the low-maintenance champs of investing. They do not try to beat the market or outguess it they just mirror it. Think of them like that student who does not try to reinvent the wheel but still gets top marks by following the class notes to the letter.

When you invest in an index fund, your money is spread across a wide basket of companies that make up a particular index like the S&P 500 (top US companies), MSCI World (global giants), or closer to home, the FTSE ADX 15 (some of the UAE’s biggest stocks).

Because these funds are not actively managed (ie, no team of analysts trying to predict market winners), the costs stay impressively low sometimes as little as 0.1 per cent per year. That might not sound like much, but over time, low fees mean more of your returns stay in your pocket, not your fund manager’s.

Here’s where things get interesting. Let’s say you have built a decent investment in a mutual fund, solid, diversified and even earning you steady returns. Did you know you can put that to work without selling a single unit?

Enter leverage. Also known as gearing your investment. Some banks (especially the ones that have good compliance teams—yes, I’m biased) will allow you to borrow against your investment portfolio, using it as collateral. So instead of liquidating your mutual fund to raise cash, you borrow against it, at a lower interest rate than a personal loan, because it’s secured.

For example, if your fund is earning seven per cent and your bank lends to you at 4.5 per cent, you’re technically making a positive spread. That’s your money working harder, earning while you borrow. But (and this is a big but), you need to understand the risk: if markets drop and the value of your portfolio falls too low, the bank might issue a margin call; meaning you need to top up the value of your portfolio or pay down the loan.

Then there are overdrafts backed by mutual funds. You do not sell your investment; you just draw some liquidity when needed. It’s a smart move for short-term needs or when you are waiting for cash to clear. Think of it as a financial breathing space, not a spending spree.

The key takeaway? If used wisely, your investments can not only grow but help you stay liquid without disrupting your long-term goals. Just do not confuse this with free money. Leverage is powerful, but like chilli in a stew, use just enough to add flavour, too much and you are in tears

So yes, you can invest right here in the UAE without selling your kidneys. Mutual funds and index funds offer great entry points into the world of investing with options that are globally credible, regulator-approved and increasingly retail-friendly. You do not need millions to start. You just need consistency, patience and a healthy dose of curiosity. Your future self will thank you.

Compliance, risk and fintech executive