ULIPs and mutual funds are two popular yet distinct investment avenues, each coming with its unique set of benefits and drawbacks. Know which one is better for your individual needs and preferences.
Diversification is the essence of financial planning and is an effective method to get maximum returns at low risk from your investment portfolio. A diversified portfolio contains an assortment of financial assets from different sectors. Ideally, an efficient portfolio should comprise small- and large-cap stocks, international equities, bonds, commodities, and so on.
However, such investments usually require considerable investment to generate satisfactory returns over time. The question, then arises, is this – how should one diversify one’s portfolio with low investment?
This article will offer some beneficial tips for how to diversify your portfolio with little money.
Zero commission brokerage trading enables investors to save on the outflow of commissions. Sarwa has introduced a zero-commission brokerage trading portal that helps investors and traders buy any stock or exchange-traded funds (ETFs) without paying any brokerage fee.
Zero commission trading portals make for a good choice for young investors who wish to diversify their investment portfolios with little investment. Some of the most common zero-commission brokerage trading portals in the UAE are Sarwa, eToro, and Robinhood.
Index funds enable investors to diversify their portfolios with minimum investment. When one buys ETFs or mutual funds that mirror the broad indices like NASDAQ, S&P 500 and more, one buys them at negligible cost. It is an easier and more efficient way to improve one’s portfolio. With index funds, you don’t have to worry about building the portfolio from the start and reviewing the company’s performance time and again.
You can also consider investing in sector-specific index funds if you want to earn returns from particular industries. While these funds are slightly more expensive than broad indices, they are suitable investment options for investors who want to actively manage their portfolios.
When planning to diversify your investment, you can also take low-cost ETFs into account as an investment option. With low-cost ETFs, you can own any security including micro-cap stocks, global equities, commodities, and real estate investment which can help in filling in the investment gaps in your portfolio. One of the major reasons to invest in low-cost ETFs is that there is a minimal fee to be paid annually for fund management.
Robo-advisors are digital investment portals that allow users to invest their money in well-structured investment portfolios. They are a low-cost investment option that requires minimal management, as their algorithm-operated financial planning platform requires negligible human supervision. Robo-advisors analyse your financial goals through an online survey and use the data to make suggestions about investment options.
The best Robo-advisors in the UAE make it easy to setup an account, comprehensively make plans as per the goals, and manage the portfolio. They also offer security services like round-the-clock customer service, low fees, and comprehensive education.
The functioning of this investment option is straightforward as the investors simply need to provide a few details, after which the Robo-advisory platform estimates the risk based on this information. Unlike most financial advisors who charge a hefty fee for their advisory services, Robo-advisors require you to spend less for online advisory services.
Investing in target-date mutual funds is another way to create a diversified portfolio with less money. Working on the lines of passive investing, these funds allow the investor to select a date in the future as their financial goal. The date selected is usually the retirement date.
Under this type of mutual fund, the funds are invested in riskier ventures (like equities in the early stage) and transfer the portfolio’s allocation to safer financial assets like bonds and cash. This type of mutual fund is suitable for people who seek to invest passively.
Another option to diversify your portfolio with minimum money is buying fractional shares. For this, you simply need to purchase fractional shares at your convenience. One of the reasons for this is that the price of the company’s shares do not affect the fractional share.
In a no-load mutual fund, the shares are sold without charging any sales commission and are directly distributed by the investment company. This makes it an ideal investment venture to diversify the portfolio with less money. Investors can invest in broad-market mutual funds.
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