Know about Retirement Planning and the best time to start making investments for a steady stream of money after retirement.
Best low risk investment options for Higher returns
Smartest investment and life plans in UAE
Foremost, let's talk about the investment climate of the UAE. Luckily, investing in the UAE is as easy as the past year. For good measure, income and gains remain free of taxes and a nominal 5% tax is charged on profits made in real estate investments. Furthermore, UAE continues to be one of the best places in the world to live and work. For example, the new labour law introduced in February 2022 makes way for more flexibility for people in the UAE to work. Needless to say, the UAE investment sector is as dynamic as it can be at the moment allowing wonderful opportunities for all investors.
So, to make headway to decide whether you should invest in the UAE or not, pick up the threads! Also, note that UAE ranked first among all the gulf countries and Arab region in the general index report of the World Happiness Report in 2020. In addition to that, UAE is rising as one of the best possible places to invest with a colossally rising value of the property and real estate. Moreover, the value for money is way better in the UAE, as you can get double in a million dirham of what you will get in cities like New York or Mumbai. Given that residents are now allowed to own property in the UAE investing in the UAE makes more sense than ever.
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Before you take the plunge to start investing right away, you need to think about how to invest money in UAE. This is because investment planning is critically essential, and you need to have a plan on hand before you can go out into the market and start investing. Blindly investing your money in UAE, simply based on luck or gut, may lead to severe losses and severe repentance.
Given below are the proper steps to start your financial planning from scratch, so what are you waiting for? Let's dive in!
Calculate your liabilities and assets to have a fair idea of what you own and owe currently. First, add your monthly or yearly income to your account. Next, also take into account all fixed and liquid assets you may have on hand. Also, add up all kinds of liabilities, such as loans mortgage, and consider adding your daily expenses. Once you have everything on books, simply calculate the surplus. Now, your surplus is what you can afford to save and then invest later. These steps will help you understand your current situation, which will help you boundlessly before taking any unrealistic risks.
Setting too ambitious or modest investment goals will not bode well for your UAE investment plan. Therefore, you need to set realistic goals and a realistic timeline to achieve them. Being too vague about your investment goals is surely not a good idea. For example, instead of saying that your investment goal is to spend your retirement years comfortably, sit back and crunch numbers to find out the exact sum, you will need as a retirement sum. Once you have a number in front of you, create a timeline in which you would like to achieve this goal. Adding to that, your financial or investment goals can be bifurcated into three categories – income, safety and growth. So, make sure you have all three of these categories jotted down before moving on to the next step.
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Clearly defining your savings and spending is the only way you will be able to effectively partake in the UAE investment game (and ultimately win!). So, focus on designing a personal budget and implementing it in your daily life, especially if you have limited income. However, people with a large sum of disposable income may not need a strict budget to spare some money for investing in UAE. Still, having a budget on-hand helps you save more and spend less, meaning that you will have supplemental funds to invest and build further.
Before you begin saving to invest, you need to build an emergency fund and set that aside. For instance, if you end up investing in high-risk investment options or options with a lock-in period, your invested money will be of no good if an emergency pops up. Therefore, you need to set a particular sum aside just to be used in emergencies. This set-aside fund will also give you much more flexibility in choosing high-yielding and high-risk investment options. A win-win situation, right?
Two main components take precedence over everything when you sit back to build your investment strategy – time horizon and risk tolerance. Both these factors play a crucial role in helping you decide the kind of investment products you should go with. For example, if you want to invest in the long-term, you can go with aggressive high-risk investment options like unit-linked investment plans. On the other hand, if your investment goals are for short-term and low-risk profiles, something like immediate annuity investment plans can interest and benefit you. Thus, knowing your time horizon and risk tolerance will also help design a more balanced investment portfolio. So that's how you strategise building your investment portfolio for maximum returns.
Once you are clear about your investment strategy, it's time to design your investment portfolio diligently. Your investment portfolio or investment policy will contain different types of the best investment in the UAE for you to invest in. In addition, it will also contain your investment goals, strategies to achieve those goals, your expected returns, timeline, the kinds of investment options you choose and when your portfolio is required to be re-balanced. Even better, take the assistance of a financial advisor to create a well-thought and fact-based investment portfolio.
Your investment needs and investment scope of your chosen options may change over time. Hence, your investment portfolio and strategy should be revisited in a timely manner. So, assess your risk tolerance and time horizon and note changes, if any. Next, adjust your investment strategy and portfolio accordingly. The best strategy to re-balancing your UAE investment plans is once every year.
Choosing your ideal money investment options in UAE can be challenging, given the myriad of different choices available in the market. Still, you don't need to do the legwork as given below are some of the top UAE investment options to lighten your burden. Tread along!
As the name suggests, Child investment plans are designed solely to aid you in achieving your short-term goals related to your children. Child investment plans are also often referred to as child insurance plans. As evident, life insurance companies generally offer child investment plans. Further, parents buy child investment plans and submit the yearly or monthly premium to build up a corpus. Then, the corpus built in these investment plans can be withdrawn whenever the children require it. Some providers also offer milestone-based withdrawals. Here, parents can withdraw funds from the child investment plan corpus as their children achieve essential milestones in life, such as high-school graduation, college graduation, or marriage. Along with that, child investment plans also offer a death benefit to children in case a parent meets their untimely demise. So, if your initial investment goal is to ensure a safe future for your children, child investment plans are the best UAE investment options to go with.
Things to Keep in Mind About Child Investment Plans
Endowment investment plans are a type of life insurance policy that ensures that policyholder still receives a lump sum compensation amount even if they survive the tenure of a life insurance plan. So, one can say that endowment plans are insurance for your life insurance plans. Strikingly, generic term life insurance plans only pay up if the insured person meets their demise during the tenure of their plan. However, endowment plans divide your premium into two parts – one is used to build a corpus, and another is used as payment for term life insurance benefits. The corpus that you build during the plan's tenure is given when the plan hits maturity. Moreover, endowment plans ensure that your and your family's future is safe regardless of how the events turn out.
Things to Keep in Mind About Endowment Investment Plans
Annuity plans are long-term investment tools where you make a lump sum investment in the beginning when taking on the plan or regular monthly/yearly premium. Then, the invested amount gets locked in for a certain period. Once your annuity plan reaches maturity, you start receiving a regular payment as income from the provider. Additionally, the compensation amount can also be received as a lump sum benefit. Also, keep in mind that the annuity plans are strictly investment plans and hence do not provide any life insurance benefits like endowment or child investment plans.
Things to Keep in Mind About Annuity Investment Plans
If high-risk and higher returns are a part of your investment strategy, unit-linked investment plans are the perfect fit for you. ULIPs are a type of invest-cum-insurance plan. Moreover, just like endowment investment plans – one part of the paid premium goes to insurance benefits, and the other is saved for your investment. In addition, you also get an option to make a lump sum payment in the beginning for investment purposes. In Unit Linked Insurance Plans, your provider presents a portfolio with possible investment options. Over and above, you and other policyholders are free to choose your investment ventures here. Next, the insurer combines the invested money by all policyholders and invest it in the venture of their choice. Thereafter, the total amount of the corpus is segregated into units, and each policyholder is allotted units as per the level of their investment. Finally, returns are awarded as per the units a certain policyholder holds.
Things to Keep in Mind About Unit Linked Insurance Plans (ULIPs)
Regarded as one of the safest investment options available in the market, fixed deposits are short-term, low-risk investment options offered by banks. You open a fixed deposit account and add your money to it. The funds get locked for a pre-decided term. Once the maturity of the deposit arrives, you can withdraw your funds with the earned profit amount. Interestingly, the profit or interest rate of fixed deposit accounts are pre-decided, so you can calculate your return from the very start and know what profit you'll receive after a certain number of years.
Things to Keep in Mind About Fixed Deposit Accounts
Bonds are simply an instrument to gain interest for the buyer and raise money for the debtor. Certain authorised sellers can sell bonds to buyers with conditions. In addition, buyers can buy bonds with interest payable on it. Bonds can be bought for a pre-determined lock-in period which is negotiable as per the policies of the seller and the requirements of the buyer. For example, you buy bonds worth AED 10,000 for 10 years with 9% interest applicable. The seller will pay you 9% interest every year and pay back your AED 10,000 principal amount after the end of 10-year-long tenure.
Things to Keep in Mind About Bonds
Retirement or pension plans are other forms of long-term investment in the UAE market. Traditionally retirement plans used to be a combination of employee and employer contributions. Now insurance companies offer pension plans or retirement plans in which the plan holder can contribute a small premium amount to build a much larger corpus. Later, the final corpus is used to offer a regular compensation amount to the plan holders when they retire. Along with that, the premiums you contribute to building a corpus can be used to make further investments by the insurance company. Over and above, you can also pick your investment venture yourself. If the invested sum earns any profit, it is added to the principal corpus and given back to the plan holder. In addition, retirement plan benefits can be obtained as lump-sum amounts as well as regular payments with intervals.
Things to Keep in Mind About Retirement Plans
Money-back plans are a type of life insurance plan with a slightly different work mechanism. For example, Money-Back plans also offer a survival benefit in addition to the death benefit. The survival benefit is offered at 5,10,15,20, or 25 years, depending on the tenure of the plan. So, when you complete 5 years with a money-back plan, a part of the total sum is assured. The same applies to other milestone interval years as well. In case the policyholder doesn't make it and meets their demise within the tenure of the plan, the dependents are given a death benefit amount as per the terms of the plan. Albeit, money-back plans are not a kind of core investment plans, they do offer some similar benefits.
Things to Keep in Mind About Money-Back Plans
Diversification of investment portfolio or plan simply means investing in different kinds of investment options in varying proportions. In addition, you can decrease your investment risk significantly when you ideally diversify your investments and divide them among different options. Over and above, a diverse investment portfolio also increases your chances of getting better returns in entirety. So, to ideally diversify your investment portfolio, read on the following steps:
In a Nutshell
Take your UAE Money investment planning very seriously and passionately but also don't shy away from taking a few risks. For sure, the investment field is prone to many ups and downs, pretty quick ones too. However, that does not mean that it's all about instincts and chances. The investment sector can be very rewarding as long as you take controlled risks and keep a diversified portfolio. Being a step ahead, keep a financial advisor in the loop and keep revising your investment strategies
Guide for Investment Plan in UAE
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