Top 8 Ways to Invest Money in UAE

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Investment in UAE

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Investing your money is undoubtedly one of the best ways to make it grow while it's resting (and you too!). Sounds impressive, right? However, investment isn't something that can be done on a whim. It requires a thorough understanding of the product that you choose as well as the market that you enter. Yet, the hassle doesn't end here; you must also know your capabilities in terms of risk tolerance, investment capabilities, timelines, etc. So, to steer you on the right path, we have created this detailed guide about the UAE money investment scope and the best way to invest money in UAE.

Investment Climate of the UAE – What Are the Current Stats?

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.

Should You Invest money in UAE?

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.

Top Reasons to Invest Your Money in the UAE

  • High Returns: Interestingly, UAE has been developing expeditiously. From booming tourist market to constantly rising value of the real estate, UAE is on its way to becoming one of the most prominent names among the developing nations. Even more, cities like Dubai are en route to becoming "new world cities". In light of that, the value of property in the UAE is shooting up and proliferating expansively and is expected to rise exuberantly shortly. Thus, undoubtedly, Dubai and the rest of the UAE are regarded as one of the best places to invest in real estate. And since ex-pats and UAE residents are now eligible to buy property in Dubai free zones, astoundingly high returns are nothing short of reality.
  • Dynamic Market: Not to mention, the UAE market is dynamic, constantly evolving and flourishing, even when the rest of the world appears to be at a standstill. Take the recent pandemic as an example; when most markets crashed and fell to their all-time low, UAE still held its ground. With the strategic location of the emirates, the political and economic stability and the financial stronghold, the UAE investment market remains vigorous, strong, and dynamic. Over and above, UAE allows 100% foreign ownership of assets which bodes tremendously well for ex-pat investors.
  • No Shortage of Options: As the fact stands, there is no shortage of options to invest money in UAE market as you get a plethora of options to choose from, so you don't compromise on one thing to get another. Let's talk about what the UAE investment market offers for you. Among the multitude of options, you can even go for traditional and safer options like fixed deposits or even choose to go for something riskier, say the stock market; one thing is for sure, you don't settle for less in the UAE investment market. Furthermore, the most popular investment options in the UAE include UAE investment plans, global and national stocks, real estate market, bonds, mutual funds, EFTs and REITs. In addition, other options may also rank in the race depending on market trends and waves. Naturally, you can pick any of these options and in any number to create your robust UAE investment portfolio.
  • Negligible Taxes on Profit: The heart of the UAE market that attracts many people to the UAE is the tax-free earning environment. Majorly, this is because taxes imposed on income and investment returns are sky-high in most countries around the world, but not in the UAE, though. However, real estate is the only investment market where 5% taxes are applicable on returns. Apart from that, almost all investment products are free of taxes. Therefore, earning tax-free gains is one of the most significant selling points for the UAE market, and of course, for the right reasons, who wants to pay tax on their profit?
  • Free Zones for Rental Investments: As the previously practised rules stood, UAE residents and ex-pats were not allowed to own property in the UAE. Besides, residents could only have rental leases and could not buy any real estate. However, these laws have been changed recently, and about 29 free zones have been created in Dubai. For the good part, ex-pats can now invest in real estate in these free zones and buy property effortlessly.
  • Residency-Related Benefits: Since Dubai is regarded as a very comfortable and favourable workplace by many, it is natural for people to want to get access to the emirate. Moreover, investing in the UAE can make this passage much easier for you in many ways. As per some newly established guidelines, investors are awarded resident visas as per the size of their investment in real estate. Therefore, for someone looking for easy passage to move to the UAE, investment indeed opens quite a lot of doors.
7 Best Short term Investment Options with High Returns in the UAE

 Making Way for Effective UAE Investment Planning

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!

  • Understand Your Current Situation
  • Create Clear & Realistic Investment Goals
  • Design Your Personal Budget
  • Start with an Emergency Fund
  • Build Investment Strategy
  • Design Your Investment Policy and Portfolio
  • Regularly Monitor and Revisit Your Plan

Understand Your Current Situation

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.

Create Clear & Realistic Investment Goals

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.

4 Financial Goals to Set in 2022

Design Your Personal Budget

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.

Start with an Emergency Fund

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?

Build Investment Strategy

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.

Design Your Investment Policy and Portfolio

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.

Regularly Monitor and Revisit Your Plan

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.

Best Money Investment Options in UAE

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!

  • Child Investment Plans
  • Endowment Investment Plans
  • Annuity Investment Plans
  • Unit Linked Insurance Plans
  • Fixed Deposit Accounts
  • Bonds
  • Retirement Investment Plans
  • Money-Back Plans

Child Investment Plans

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

  • Child investment or insurance plans are solely meant for children's benefit. However, parents or guardians of the child in concern are responsible for paying off the due premiums.
  • There are several kinds of child investment plans one can buy in the UAE. These types include single-premium child plans (lump sum investment initially), regular premium child plans, unit-linked investment plans for children and child endowment plans.
  • Child investment plans traditionally offer higher returns, ranging around 10%. So, make sure that you skim through the option ideally before finalising one variant.
  • The risk level involved in child investment plans is directly proportional to the type of investment plan you choose. For example, UILP child plans will bring higher risk but maximum returns. On the other hand, endowment child plans offer a lower risk profile and moderate returns over a longer tenure.

Endowment 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

  • Since endowment plans are relatively low-risk investment options, the returns are not as high as other investment plans. But if you cannot afford to take even minimal risk with your money, endowment plans are a pretty great option to go with.
  • Returns are almost guaranteed with endowment plans.
  • Note that liquidity of funds still exists even with the option to get a lump-sum payment upon maturity of the plan. If the policyholder survives the plan's tenure, the part of the paid premium that goes to life insurance cover lapses.
  • Endowment plans are only a good investment option to go with when you require term life insurance and investment opportunities. If you think you can make do without life insurance cover, there are other better investment options to go with.

Annuity 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

  • Since there is a lock-in period for the sum invested in an annuity plan, penalties are applicable on early withdrawals.
  • Contracts are long-term in annuity plans, meaning that your investment here will not generate liquid funds.
  • Investments that you pour into annuity plans are completely out of your control. In addition, the insurance company is free to invest it whenever and wherever they see fit.
  • Early withdrawals from annuity funds are not allowed. However, if you still go ahead and make any early withdrawals, high fees may be applicable.
  • Make sure that you check the details of your annuity plans properly. Many annuity plans do not offer returns that can build a corpus good enough to beat the inflation rate. Therefore, make sure to buy Annuity Investment Plans after consulting an expert or conducting thorough research yourself.

Unit Linked Insurance 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)

  • The biggest benefit of ULIPs is the flexibility they offer. You not only have proper control over where your money is invested but also get a certain level of liquidity.
  • Policyholders of ULIPs can make partial withdrawals after small intervals. Generally, most providers set the first interval at 5 years.
  • Transparency is of the highest order when it comes to unit liked insurance plans. The complete portfolio of the investment option, risk factors and levels involved, as well as expected returns, are specifically provided to the plan holders. Additionally, you also receive a quarterly and yearly report on your investment status.
  • ULIPs can be complicated since the investment part is not very different from what you will experience in the independent investment sector.

Fixed Deposit Accounts

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

  • Fixed deposits are one of the most secure investment options available out there in the market. Luckily, returns are guaranteed, and there is no risk of losing your savings here.
  • Given the no-risk involved fact, of course, fixed deposits do not offer a very high return rate. The maximum range of profit rate offered by most fixed deposits ranges from 1%-2%.
  • The exceptionally lower interest rate means that you will not be able to develop a corpus that can potentially beat inflation in the long run.
  • Since interest rates do not increase over time for fixed deposits, gains become stagnant in the long run.

Bonds

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

  • Bonds can be considered moderate-risk and moderate-return investment options in the UAE.
  • You can get a stable income when you invest in bonds, given that your authorised seller is fair and trustworthy in general.
  • Pre-payment and re-payment risks are very real with investment bonds.
  • Investment bonds may also be subject to reinvestment risk when interest rates fall in the market. Finding a new, better investor for your investment can be hard, especially when the market hits a recession. However, this is only applicable when bonds are callable.
  • If you are buying fixed-rate investment bonds, you may expose yourself to the potential risk of a decrease in the value of the bonds. For example, if the market standards for investment rates increase over time, the value of your fixed-rate bonds will decrease. However, this also means that you will not face a decline in interest rates when the market crashes and the standard interest rate falls.

Retirement Investment Plans

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

  • Retirement plans are a great way to ensure steady income when you finally stop working.
  • Depending on the investment venture you choose, retirement investment plans can turn out to be a high-risk, high-return opportunity or low-risk, low-returns one.
  • Since the corpus is only released when you retire, liquidity is limited with retirement investment plans.
  • A high management fee may be applicable depending on your choice of provider, so make sure you stay ahead of all the fees and charges

Money-Back 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

  • The rate of return is much lower with money back plans since the risk factor is significantly lower.
  • Money-back plans may make keeping track of your money harder. Furthermore, accounting is difficult with these plans in the bigger picture and hence may complicate your money management strategy.

Diversifying Your Investment Portfolio – Why and How?

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:

  • Scatter Your Investments: Ensure that you do not put all your saved money into one investment opportunity only. As famously said, 'Don't put all your eggs in one basket'. This not only limits liquidity for you but may also increase risks several folds. Therefore, keep scattering your money over a few investment options – each one with different characteristics and advantages.
  • Keep Exploring Options: Investment opportunities are ever-evolving. Gone are the days when mutual funds were the only choice after Fixed Deposits in the Investment Market; now, the investment market is flooded with newer and better investment ventures. So, make sure you keep exploring for any new upcoming investment plans that seem to offer better terms and returns.
  • Do Not Shy Away from Risks: The golden rule of investment is simple and straightforward – the more risk you are ready to take, the better returns you may generate. 'Higher the risk, higher the Profit'. However, do not put all your savings in a risky venture but do keep some money aside for it.
  • Add A Little Stability: Keep a little bit of sum aside to invest in more stable options like investment bonds. This ensures that you have a regular flow of income even when you are busy trying out other riskier investment options.
  • Never Stop Building: You must always keep exploring and building your investment portfolio. So, keep adding new ventures and keep revisiting your old strategies from time to time. This will ensure that you are ahead of the market developments and gain expansively.

Key Things to Keep in Mind When Investing Money in UAE

  • Risk Factors Involved: Every investment option will come with at least a little bit of risk factor. Thus, check the level of risk a particular option brings and whether you can afford to take it. Undoubtedly, high-risk investment options surely open ways for higher returns. However, you must consider the disposability of your UAE investment beforehand. Losing your investment is as likely as gaining a sum several times greater than your investment. Hence, always assess risk properly before you begin investing your hard-earned money.
  • Time Horizon: A suitable timeline for investment always differs for everyone. You may have some short-term goals and some that can be completed with long-term investments. Ideally, analyse the time frame you have and choose investment options accordingly. Short-term, high-return investment goals can be fulfilled with more dynamic and high-risk investment options. Or, if you have long-term investment plans, you can choose to divide your investment among high-risk and low-risk long-term options. Withal, a diverse portfolio will always work to your advantage in the long term.
  • Your Financial Goals: Children's education, retirement corpus, buying a house or saving enough to buy a new car – everything counts as your financial goal. Therefore, your investment strategy should be designed and aligned as per your investment goals. For example, short-term goals like children's education can be sufficed with short-term investment planning. Or financial goals like building a retirement corpus can be done via long-term investment options like annuity investment plans.
  • Any Plausible Charges: Apart from investment plans like endowment and child investment plans aside, some investment options may come with a small investment charge. Check these charges, if any, and steer clear of any kind of fraudulent investment opportunities.

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