Smartest investment and life plans in UAE

Invest Big with a Small Budget!

By PolicyBazaar
  | Published: 24 April 2020 | Last Updated On: 20 January 2021

Invest smart today for a better tomorrow

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Smartest investment and life plans in UAE

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There is one common myth about investing that goes around in the market-

You need to have a huge bank account balance just for getting started.

While the fact is-

In order to build a solid portfolio, you can start with a few thousand, in fact, a few hundreds of your hard-earned dirhams.

This article includes some smart tips for low-rollers that can help them to kickstart a savings & investment plan.

No matter you plan to invest a little or a huge amount in high-risk gambles or safe bets, the following tips should help you in getting your plans on the right track. 

1.      Automating the Savings

The effort for setting aside a particular amount dependably for the purpose of savings each month will pay off in the long run. In case you lack the willpower and the required effort to do this, you can seek a little help from technology- through various computer applications and smartphones.

There are many apps that make savings easy by simply rounding up your purchases & other transactions to the nearest dirham and putting the savings aside.

If you don’t want to use these apps, you can check with your bank about its mobile application and other ways through which you may automatically transfer money from your non-savings accounts to the ones that are better suitable for investment and savings. 

2.      Dealing with the Debts

Before you start saving, analyze the cost that you will have to bear for carrying debts that you already have. You should also consider how quickly you can discharge these debts. The rate of interest on credit card and student loans are pretty high.

So, if you are carrying a lot of debt with high interest rates, it makes sense to repay at least a part of it before making an investment in UAE.

Although you cannot estimate the exact return on the maximum of your investments, it is quite certain that retiring debt having a 20% rate of interest a year early is equally good as earning a return of 20% on your money. 

3.      Keep Your Retirement in Mind

The main objective of savings and investing (even when you start young) must be ensuring that you have a sufficient amount of money when you retire. Taking complete advantage of the inducements provided by your employers as well as the government should be a priority in your financial planning for making your retirement more secure.

If you have a small budget, even getting yourself enrolled in an employer retirement policy may seem unaffordable. However, you can invest in a retirement plan sponsored by your employer using very small amounts that would hardly affect your budget.

For instance, you can invest as low as 1% of your income to the employer retirement plan. It is quite easy to invest such a tiny amount out of your hard-earned dirhams. Hence, there are very low chances of missing your contributions to such an investment. 

4.      The Cookie Jar Method

Saving funds and investing them are connected to each other closely. For investing money, you will first have to save some of it (obviously). Saving money will take a lot less time than you must have thought of. In fact, it involves very tiny steps.

If you are not really a saver, you can begin by putting aside only AED 10 every week. This may not seem a lot now, but after a year or so, it will come up to AED 500.

You can put this amount into a shoebox, an envelope, your piggy bank, or even the best bank of the first resort- a cookie jar. Now, this may sound silly, but it usually turns out to be an important first step.

You must get into a habit of living on an amount lower than what you earn, stashing the savings aside in a safe place.

These days, technology has found an electronic replacement of cookie jars- an online savings account. You can withdraw money in 2 business days in case you need it; however, it is not connected to your debit card. When the amount of savings becomes large enough, you have the option of withdrawing your money and transferring it into some actual investment vehicle.

5.      Set Your Foot in the Real Estate

Investments in real estate do not necessarily involve a lot of money. There are various options for crowdfunding when it comes to real estate. Although it may sound like something you were nervous about getting into, it may actually turn out to be an intriguing investment. 

6.      Mutual Funds with Low Initial Investment can be a Good Start

Mutual funds refer to the investment securities, which allow the investor to put their money in a portfolio of bonds and stocks with one transaction, making them a good place to park your money as new investors.

However, there is one constraint, there are many companies that ask for a minimum investment initially. In case you are making a mutual funds’ investment in UAE for the first time with a small budget, this minimum amount may go beyond what your pocket allows.

But, there are some companies that agree to waive off this minimum investment criterion if you make the investments of a particular amount automatically every month.

Automatic investment has become a common feature when it comes to ETF IRA accounts and mutual funds. This feature is the most convenient when you do it from your payroll savings.

Typically, you can opt for an automatic situation for the deposit from your payroll, in the same way, you do with your employer retirement plan. You can contact your human resource department to know the procedure for setting it up. 

In a Nutshell!

When it comes to investments with a small amount, there are many ways to begin. The mobile applications and various other online platforms have made investments easier now than ever.

What you really need to do is start somewhere. And when you do, it will become easier with time, and your future self would be grateful to you for this. The tips mentioned above will help you in making smart investments that too on a tight budget.