Investment Plans

For everyman the list of questions about investment is endless. When talking about the world of investing, the thoughts that arise are clouded with fear. When it comes to investing, markets may change but always remember – good advice is timeless.

It was once said by Warren Buffet that “Someone’s sitting in the shade today as someone planted a tree a long time ago.” One thing that can be learned from this saying is that one should start to invest early in age. Ideally, an individual should start looking for suitable investment plans when earning a stable income. The longer time in the market, the minimal the risk exposure. 

The process of investing allows one to grow the savings, rather than just maintaining. This also provides one with greater financial rewards in the future. Investment planning involves the right assessment of the wide array of investment options in order to choose the most suitable investment plan.

What is an Investment Plan?

An investment plan is a financial instrument that offers the opportunity to create future wealth. Investment planning is a process that helps in matching financial objectives with financial resources. It is an essential component of financial planning.

Various Kinds of Investment in UAE

The most useful strategies for investment in UAE  are easy to understand and practice. The 3 bucket investment approach is a straightforward road to investing one’s savings. It incorporates the individual's needs at different stages of life and fulfills the varied financial goals.

Bucket #1 – Achieve Financial Security

This depicts one’s short term goals and emergency savings. The savings in this bucket should be extremely liquid investments. The main purpose served by this bucket should be avoiding borrowing and panic during any financial emergency. The main purpose should be liquidity and not earning high returns. Investing in extremely liquid funds offers extremely low returns. People who do not have sufficient savings in bucket number 1 end up borrowing via loans or credit cards.

Short Term Investment Options in UAE that can be added in this bucket:

  1. National Bonds: National bonds are an ideal investment option due to the liquidity, safety and the slightly better rate of return that they offer. It is easy to invest in national bonds. In most cases, the holding period for national bonds is 3 months after which they can be redeemed.
  1. Fixed Deposits or E-Savers: Numerous banks in UAE offer Fixed Deposits and E-saver accounts. Such accounts often offer interest rates that are higher than that of Savings accounts. They are a good choice in the current market scenario with the rising interest rates, as they offer both liquidity and returns. However, many E-saver accounts have restrictions on the withdrawals, which does not encourage frequent withdrawals. The fact that withdrawing money from Fixed Deposits before maturity offers a lower return helps in ensuring that the money is intact in place for the time when there is actual need.

Bucket #2 – Achieve Financial Comfort

This bucket is a strategy for investing towards achieving medium-term goals such as buying a car, saving for a vacation, investing in properties, paying off debt, etc. In such a bucket, ideally, the investments are less liquid in the short run and are often volatile in nature.

Medium-Term Investment Options in UAE that can be added in this bucket:

  1. Gold: Investments in gold can be made in the form of certificates, coins, bars, ETFs and funds. Global equity valuations are usually high which is what makes gold a safe asset in case other assets are going down in value.
  1. Open Architecture Investment Platforms: The investor is provided with a wide array of opportunities to invest such as low-cost ETFs, REIT, Structured Notes, and Funds. These platforms can be used to invest in bonds and equities of major exchanges such as NASDAQ, London, Hongkong, Tokyo, etc. There are a variety of choices of asset classes available and no lock-in duration or surrender periods.
  1. Indian Mutual Funds in USD Denomination (for NRIs): Several Indian Expats prefer to invest in the growth opportunities in India via the Mutual Funds. However, the depreciation of the currency is often a big deterrent in such cases. Making investments in Indian Mutual Funds in the US Dollar Denomination can mitigate currency risk while offering good growth
  1. Initial Public Offering: As a maturing financial market, in UAE many businesses consider going public.

Bucket #3– Achieve Financial Independence

This is the most essential bucket, yet ignored more than often. It focuses on achieving long term goals such as saving for retirement, saving for a child’s further education, saving for a child’s marriage, investment in life insurance, etc.

Long-Term Investment Options in UAE that can be added in this bucket:

  1. Investor Advantage: Short-term plans for long-term well being.
  1. Open Architecture Platforms: The investor is provided with a wide array of opportunities to invest such as low-cost ETFs, REIT, Structured Notes, and Funds. These platforms can be used to invest in bonds and equities of major exchanges such as NASDAQ, London, Hongkong, Tokyo, etc.
  1. Endowment Plans: These plans help in planning for retirement, a child’s further education, and other financial goals.
  1. Wealth Accumulation Plans: These plans are designed to invest in international mutual funds that help in the growth of the investment value.
  1. Life Insurance Plan

Best Investment Opportunities in UAE

There are numerous providers in UAE offering investment opportunities, some of them are:

Provider Name Investment Opportunities in UAE

Emirates NBD

  • Super Saver Plan
  • Income Builder Plan
  • Tawfeeq Investment Programme
  • Takaful & Savings Programme

ADIB

  • Short Term Investment
  • Investment Solutions

Rakbank (RAKinvest)

  • Fixed Income Products
  • Mutual Funds
  • Structured Products
  • Unit Linked Savings and Investment Plans
  • Whole of Life Protection Plans
  • Term Assurance

HSBC

  • Fixed Income
  • Mutual Funds

ADCB

  • ADCB Managed Funds
  • International Mutual Funds
  • Systematic Investment Plans
  • Structured Products
  • Trading Services
  • Investment Strategy
  • Whole of Life Insurance
  • ADCB Securities
  • Asset Management

The Objective of Investment Plans

The investment mechanisms in the market are increasing by the day. Yet, every investment instrument can be categorized into three basic but important characteristics: safety, growth, and income. These characteristics match investor objectives. While an investor can have more than one of the above-mentioned objectives, the success of one objective comes at the expense of the other.

Safety

The saying that there is no investment that is completely safe and secure is true. However, it is possible for one to get close to the complete safety for the investment funds by taking up government-issued securities in stable economies or by taking up corporate bonds issued by stable large companies. Such securities are the best means of stabilizing the principal while receiving a fixed return.

Growth

Capital gains refer to the gains earned if the security is sold at a price that is higher than the price at which it was purchased. Therefore, investors who seek capital gains do not expect fixed or ongoing returns from the investments in the portfolio, they instead seek long term growth.

Income

Investors who seek higher yields are required to sacrifice security, as the safest investments are often those that offer the lowest yields. The risk is directly related to the yield, therefore, the higher the risk, the higher the yield offered.

There are also secondary objectives such as liquidity. Many investments in the market are reasonably illiquid, and cannot be immediately sold and converted into cash easily. There is a certain amount of income or capital growth that needs to be sacrificed in order to achieve liquidity.

Features and Benefits of Investment Plans in UAE

There are numerous benefits of investing, some of them are:

Hedge Against Inflation           

An individual due to inflation may end up losing money over time, which makes it important to invest funds and grow them. The rate of return earned on the funds helps in hedging against inflation since the value of funds increases.

Builds Wealth

Investing is the key to building wealth. There are numerous ways to invest in the market. However, one should create a proper investment plan that meets the objectives and needs.

Smooth Retirement                                                                                         

A smooth retirement with sufficient funds can be attained by making one’s money grow. The higher the amount of investment, the higher is the compound interest.

Meeting Financial Goals

One can even choose to invest in order to achieve a financial goal such as purchasing a car, financing a dream holiday, saving for a child’s further education, etc. The earlier one invests the money, the faster one achieves financial goals.

Tips to Choose the Best Investment in UAE

Use these key steps in order to find the best investment in UAE:

Clear Goals and Objectives

It is important for an investor to take time and think about his or her expectations out of the investment. Being well aware of the requirements and risk appetite helps in getting a headstart in the investment industry.

Time Horizon

It is important for an investor to know when he/she aims at getting back the money invested. The time frame varies as per financial goals, which impacts the level of risk one can take.

Diversify the Portfolio

The key role of investment is to diversify the investment portfolio with securities that are negatively correlated. Diversification helps in maintaining a balance between return and risk by spreading the funds.

Review the Charges

There is a fee involved in any kind of investment. It is important to properly research the charges involved in any kind of investment, and whether they are reasonable.  

Review With Time

Investments are to be reviewed with time, especially as one crosses the important milestones in life. This helps in ensuring that an investor’s investments match his or her current financial position and requirements.

 

Why Should You Invest?

Ans:

Earning money at present is not enough as it may not be sufficient to fulfill the financial goals of life. Therefore, it is important to invest funds. The funds lying in the bank as savings is like letting an opportunity to earn money pass by. It is important to smartly invest in the various plans available in the market as per the one that is suitable for your goals.

By choosing the best plan, one can achieve maximum returns in the long-run, which can be accumulated as wealth to achieve major financial goals in the future.

What is the difference between Saving and Investment?

Ans:

The terms ‘saving’ and ‘investment’ are often used interchangeably. However, both are not the same. Savings are a form of account that holds no risk. The interest earned is on the money that is saved, and there are guaranteed returns. It is ideal for someone who wants to save for a short-term period purpose.

Whereas, investment plans aimed at creating wealth in the long run. The risk however in these plans is higher, which is why the potential returns are higher. In this, the investor’s money is invested in different kinds of investment vehicles that have a probability of generating high returns in the future.

When Should You Start Investing?

Ans:

The earlier one starts investing, the higher are the chances to benefit in the long run. The best age to start investing is when you start earning a stable income. By investing at an earlier age, you can take advantage of higher compound interest. It also helps in recouping any losses arising because of market conditions.

What is the Eligibility to Buy Investment Plans?

Ans:

The investment market is growing by the day with new innovations and products. The eligibility requirements for investing in the various kind of investment vehicles varies as per the providers in UAE.

What are the Best Investment in UAE for Expats?

Ans:

The best investment in UAE for Expats is in stocks, bonds, real estate, gold, mutual funds in UAE, or the other types of funds.

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