How to invest in ETFs in Dubai 

Dive into the world of exchange-traded funds (ETFs) and uncover the secrets behind these innovative investment tools. Find out how to invest in ETFs in Dubai and gain a comprehensive understanding of how ETFs can effectively contribute to achieving your financial goals.  

With their convenient accessibility, high liquidity, and ability to provide exposure to diverse asset classes, ETFs are a unique and advantageous investment option. Ready to discover more? Read this ultimate ETF guide and elevate your investing and trading journey to new heights! 

What is an exchange-traded fund (ETF)? 

ETFs are baskets of securities that allow you to gain exposure to a diversified portfolio of assets in a single trade. These funds are designed to track the performance of a specific index, sector, commodity or asset class. Unlike mutual funds, investing in ETFs involves buying or selling them on a stock exchange, just like regular stocks. An ETF can be designed to follow anything, ranging from the price of a single commodity to a broad and varied portfolio of securities. ETFs can even be designed to track specific investment strategies. 

Investing in ETFs can provide investors with the ability to own a tiny piece of a diverse portfolio, which includes everything from stocks and bonds to commodities and even real estate! It's like having your very own financial but where you can sample a little bit of everything without having to buy each item separately. So, with an ETF, you can become a master of diversification and an investor with a super-powered portfolio! 

Beginnings of ETFs 

ETFs have carved a significant niche in the world of finance, redefining how traders and investors approach the markets. Born in the early 1990s, ETFs emerged as a game-changer, providing diversified investment options accessible to all. With their unique structure, ETFs combine the benefits of mutual funds and stocks, offering liquidity, transparency, and flexibility like never before. These investment vehicles have democratized investing, empowering individuals to build diversified portfolios with ease. ETFs have become a cornerstone of modern trading, allowing investors worldwide to gain exposure to a wide range of assets, sectors, and markets. 

The SPDR S&P 500 ETF (SPY), tracking the S&P 500 Index, was created in 1993 and was the first US-listed ETF. 

Types of ETFs 

ETFs belong to either passive or actively managed. Passive ETFs seek to mirror the performance of a larger index, such as the S&P 500 or a specific sector or trend. Gold mining stocks are an example of the actively managed ones that don’t follow a specific index. Instead, portfolio managers actively decide which securities to include in the ETF's portfolio. While actively managed ETFs offer advantages over passive ETFs, they are generally more costly for investors.  

Let's delve into the world of actively managed ETFs. 

Currency ETFs 

Currency ETFs are collective investment funds that mirror the performance of currency pairs, including both domestic and foreign currencies. These ETFs serve various objectives. Speculating on currency price fluctuations driven by political and economic factors impacting a country is one of them.  

What’s more, currency ETFs help with portfolio diversification or act as a hedge against volatility in forex markets by importers and exporters. Some currency ETFs are even used as a safeguard against inflation risk. 

Stock ETFs 

Stock (equity) ETFs are made up of a collection of stocks that aim to track a specific industry or sector. For instance, a stock ETF might focus on automotive or foreign stocks. The purpose is to offer diversified exposure to a particular industry, including established high-performing and emerging companies with growth potential. Unlike stock mutual funds, stock ETFs have lower fees and don’t entail direct ownership of the underlying securities. 

Commodity ETFs 

Commodity ETFs focus on investing in various commodities, such as crude oil or gold. These ETFs offer several advantages. Firstly, they contribute to portfolio diversification, providing a means to hedge against downturns.  

For instance, during a stock market decline, commodity ETFs can serve as a protective buffer. Secondly, investing in commodity ETFs is more cost-effective than physically possessing the commodity. This is because of a lack of additional expenses, such as insurance and storage costs. 

Industry/Sector ETFs 

Industry or sector ETFs are investment funds concentrating on a particular sector or industry. For instance, an energy sector ETF will encompass companies involved in the energy industry. The objective of industry ETFs is to provide exposure to the potential growth of a specific industry by tracking the performance of companies operating within that sector. 

Bond ETFs 

Investors who seek steady income might choose to invest in bond ETFs. The distribution of income from these ETFs depends on the performance of the underlying bonds, which can include government bonds, corporate bonds, and municipal bonds issued by state and local entities. Bond ETFs don’t have a specific maturity date, unlike their underlying assets. Moreover, they typically trade at a premium or discount compared to the actual bond price. 

Leveraged ETFs 

The goal of leveraged ETFs is to deliver returns that are a multiple of the performance of the underlying investments. For example, a 2x leveraged S&P 500 ETF will provide a 2% return if the S&P 500 increases by 1% (conversely, a 2% loss if the index decreases by 1%). These ETFs employ derivatives such as options or futures contracts to leverage their returns. Additionally, there are leveraged inverse ETFs that seek to provide an inverse multiplied return. 

Inverse ETFs 

By shorting stocks, inverse ETFs aim to generate profits from declining stock prices. Shorting involves selling a stock with the expectation that its value will decrease and rebuying it at a lower price. Derivatives are used by inverse ETFs to short stocks, essentially making bets on market declines. 

Why invest in ETFs? 

People invest in ETFs for several reasons, including: 

Diversification: ETFs offer exposure to a basket of different assets, such as stocks, bonds, or commodities. This diversification helps spread risk, reducing the impact of individual asset performance on the overall investment. 

Liquidity: ETFs trade on stock exchanges throughout the day, giving investors easy access to buy or sell shares at prevailing market prices. This liquidity ensures flexibility and efficient execution of trades. 

Cost-effectiveness: ETFs generally have lower expense ratios compared to mutual funds. With lower management fees and operating expenses, investors can retain more of their returns. 

Simplicity: Investing in ETFs is straightforward, making them attractive to both seasoned and novice investors. They offer exposure to specific market segments without requiring in-depth. 

Is there a Dubai ETF? 

Yes! One of the most popular ETF worldwide is the iShares MSCI UAE ETF managed by BlackRock, the world's largest asset manager. This ETF aims to track the investment results of an index composed of UAE equities. It’s listed on the US stock exchange NASDAQ. The top 10 holdings in the iShares MSCI UAE ETF include the largest companies in the UAE in sectors like communication, financials, real estate, industrials, and consumer discretionary. 

But we have even better news! If you’re looking to invest in local ETFs, Chimera ETFs from Lunate Capital might be your option. With listings on the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX), they offer a single access point to the United Arab Emirates equity markets. Here’s the list of the UAE ETFs: 

Chimera S&P UAE UCITS ETF – Accumulating (CHAE) 

Chimera S&P UAE UCITS ETF – Income (CHAEIN) 

Chimera FTSE ADX 15 ETF – Income (CHADX15) 

Chimera S&P UAE Shariah ETF – Accumulating (CHAESH) 

Chimera S&P UAE Shariah ETF – Income (CHAESHIN) 

How to invest in ETFs in Dubai 

It’s actually easier than you think it might be.  

Find ETFs you want to invest in Dubai. 

Take your time to do proper research. As we’ve mentioned earlier, there are many ETF types on the market, from index to inverse ETFs. It’s your choice, ultimately. If you need help with that, you can use online screeners to find low-cost ETFs or ones in specific sectors. 

Open a broker account. 

If you've identified ETFs you'd like to invest in, it's essential to review which online brokerages in Dubai offer them. Brokerages such as amana provide access to ETFs along with thousands of other assets. Choosing a broker like amana is a wise approach, as it streamlines the process and prevents the need to open multiple accounts with different brokers. Dubai boasts numerous brokers, with amana being a prominent one. amana, a leading neo-brokerage with over a decade of experience, is regulated by multiple international authorities. With a user base exceeding 125,000 investors and traders, the amana app offers an extensive selection of ETFs for trading and investment, whether you're interested in gold, the S&P 500, or Dubai ETFs. amana has you covered!  

Buy your ETFs. 

Now it’s time to fund your account and invest or trade ETFs you’re interested in. That’s it!  

Final thoughts 

Investing in ETFs in Dubai offers many benefits for traders and investors. ETFs provide easy access to a diversified portfolio of assets, allowing for increased flexibility, liquidity, and cost-effectiveness. Whether you're looking to invest in stock ETFs, commodity ETFs, or industry-specific ETFs, Dubai offers a range of options to suit your investment goals. With the availability of local ETFs like the iShares MSCI UAE ETF and Chimera ETFs, investors and traders can gain exposure to the UAE equity markets with ease. By following a few simple steps, you can start your ETF journey in Dubai. So, dive into the world of ETFs and begin your investing and trading journey in the UAE.