8 Ways to Invest Your Money in UAE: Investing Guide

Having good investment strategies is crucial for the growth and sustainability of any business, this fact is also true for all of us as individuals. Knowing how to manage your money is even more important if you want to reach your financial freedom and never worry about retirement.

Investing money and making profits should be the first thing that comes to mind when you have some savings on the side.

Yet, many people wish to invest in stocks, bonds, and other alternative investments. But, unfortunately, they often give the stock market and other asset courses too much respect, fearing not to venture beyond putting money in a savings account. As a result, they miss out on great opportunities they can profit from because equity investments offer significantly higher long-term returns than interest on saving accounts.

In addition, one wonders whether to invest a small or a large amount of money, where to invest in UAE, and how to invest. Luckily for you, this guide will explain about 8 different ways on where to invest in UAE. Also, it will help you live out of debt without feeling the need to continuously chase after high-interest loans so you can live the life you aspire. So, eventually you will learn how to let your money work for you.

Where to Invest in UAE:

There are many ways you can invest your finances while residing in the UAE. We will present their main formats and explain the differences between all of them so that you can decide which the best destination is for your money. Remember, the safest way to invest is to diversify, avoiding getting exposed to any risks related to a particular asset. With diversification, if an issue arises from one investment, another will compensate.

After going through the following investments options, you can start your journey by determining how much you wish to invest, and which instrument suits you by comparing the percentage returns for each investment.

1. Stock Market
2. Mutual Funds
3. ETFs
4. Forex & CFD
5. Gold
6. Real Estate
7. National Bonds
8. High Yield Saving accounts

1. Invest in Stock Market from the UAE:

Buying stocks (shares) is a well-known way of investing for individuals and institutions. Stocks allow you to own a part of a company. The profit you make when you own a stock comes either from dividends or appreciation of the stock price.

• Dividends: Companies share a portion of their net income with shareholders, that is called a dividend. Some companies share dividends monthly, quarterly, semi-annually, or annually. You are allocated a part of their profits depending on the number of shares you hold.
• Appreciating stock price: This method lets you earn from a company’s valuation from the point in time you bought the shares to when you sell them. In other words, if the market value of the company is appreciating it will reflect on the price of its shares in the financial markets, consequently on the value of the shares you own.

When you live In the UAE you can invest in both, the local stock market and the US stock market.

❖ Investing in the US Stock Market from the UAE:

Residents in the UAE can invest in the US and international stock markets, all you need is to have a reliable brokerage account that allows you to buy US stocks.

How to invest: Check out How to Buy US Stocks From UAE (2022 update)

❖ Investing in the UAE Local Stock Market:

As a resident in the UAE, you can take advantage of investing in the local stock market. There are multiple promising sectors and companies with high growth potential.

Yet, similar to investing in US stocks you cannot trade by yourself; it is mandatory to open an account with one of the authorized brokerages in the country. In this case, the broker will be a local financial institution or a bank such as Emirates NBD or ADCB.

You can see here a list of all brokers in the UAE.

Setting your investing account will give you access to investing in the following markets:

• Dubai Financial Market (DFM)
• Nasdaq Dubai
• Abu Dhabi Securities Exchange (ADX)
• Saudi Stock Exchange (Tadawul)

How to invest: Check out How to Invest in UAE Stock Market

 

If you wish to invest in the UAE local stock market but you don’t know where to start, or you need a professional to help you to build your investing portfolio and manage it, please send us an email at info@thefinancedean.com

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2. Exchange Traded Funds ETFs:

An exchange-traded fund (ETF) is a financial instrument that holds a basket of different securities like bonds, stocks, and commodities.

Think about it as a group of stocks, wrapped together and sold as one package. This package is the ETF, and the performance of the underlying stocks will determine that ETF’s performance.

ETFs can replicate a market sector such as real estate, reflect a financial instrument or commodity’s performance, such as bonds or gold, or replicate a specific index like the S&P 500.

For Example, if you are willing to invest in the technology sector but you’re not sure which stocks to pick or you want to diversify your investment, you can buy an ETF that tracks the technology sector’s performance. Those types of ETFs hold stocks of multiple technology companies. By investing in one, you’ll get the diversification you seek as if you are buying all the stocks under that particular ETF.

Similar to investing in stocks, it is mandatory to open a brokerage account to invest in ETF in the UAE.

How to invest: Check out How to Invest in ETFs in Dubai

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3. Mutual Funds:

Mutual funds are one of the most popular investment tools to grow your savings. Buying shares of a mutual fund is a well-diversified tool to build your wealth. It is the right way for new investors who don’t have the expertise or time to invest their money directly in stocks.

When investing in mutual funds, a fund manager selects the best stocks under this fund to maximize the returns. However, if you’re new and want to invest in mutual funds, then here is all you need to know about it.

How to invest: Click here to read our Guide and find out how to invest in Mutual Funds in UAE

 

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4. Forex & CFD Trading in UAE:

Forex trading (FX trading) is simply when you exchange one currency for another. One makes money from Forex as the currencies’ valuation fluctuates. For example, you can exchange US dollars for British pounds, hopefully buying low and selling high. The forex market remains popular because the market is always in free flow.

On the other hand, CFD Trading is a form of trading where you predict the future valuation of an asset. If the valuation goes your way, up (go long) or down (go short), you stand to gain, and you can even increase your profit potential using leverage, such as ten times what you put in. However, the leverage can also lead to you getting a margin call, where you lose all your stake faster on a position you take.

Using CFDs, you can trade stocks, futures, commodities, indices, or currencies- basically anything. CFDs are particularly affected by supply and demand on assets or trends related to companies.

To start trading Forex and CFD, all you need to do to get started is to sign up on a reputable, regulated broker.

How to invest: Check out our list of best Forex brokers in UAE.

 

Check out our list of best CFD brokers in UAE (2021 Update).

 

*The recommended brokers are carefully picked based on different factors: safety, products, spread, fees and industry reputation.

5. Acquisition of Gold and High-Priced Metals:

Buying gold, diamonds, silver and other precious metals is ideal for many reasons. Seasoned investors diversify their portfolios with precious metals to protect themselves from soaring inflation rates for most currencies.

Remember, saving your money in any form whether in a bank account, safe deposit box or under the mattress instead of investing it does not spare you the risk of losing it as there is no guarantee that the currency will maintain its value over the years. On the contrary, it will decline in value in most cases. However, with commodities such as gold which are not affected by rampant inflation, you can sell them at any time when you need to. Best of all, you don’t need to have real gold on hand since you can also get a commodities ETF pegged on real gold stored in a vault somewhere. Therefore, you also won’t have to worry about the exuberant storage cost for this precious commodity.

How to invest: To invest in Gold and precious metals you have the following options:

• Buy a physical gold in any gold shop in the UAE
• Buy a Gold ETF from an international stock broker (such as GLD SPDR Gold ETF)
• Trade Gold and Silver through CFD brokers
  

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6. Real Estate Investment in UAE:

Real estate has always been one of the best investment options in UAE since it provides both capital appreciation and worthy passive income.

Even though the real-estate market in the UAE, as the rest of the world, faced a couple of slow-paced years, it succeeded to quickly recover and the prices of the properties are currently witnessing a significant increase, still there are a lot of good buying opportunities in the market. Keeping in mind that the location of the property plays a major role when it comes to making money. Therefore, finding a good real-estate agent can save you a fortune.

Moreover, when you buy a property and rent it out, it can generate a decent income. Generally, the net rental income of a property in Dubai is between 5% – 7%, so having an apartment worth of 1 million Dirham can generate a net passive income of 50,000 – 70,000 Dirhams annually.

How to invest: To invest in Real Estate in the UAE, you have the following options:

• Buy a property in the UAE
  We can connect you with the best real-estate advisors in the country. It is completely free chat with no commitments.

Send us an email on info@thefinancedean.com and we would be happy to assist.

• Crowd Funding
  Crowd funding in principle is the process of raising capital from a pool of investors, each of them contributes a certain amount and then the crowd funding company uses the investors capital to buy properties, rent them out and distribute the rental income to investors. With Crowd funding, you can buy a part of a property in Dubai with as little as AED 5,000.

One of the best real-estate crowd funding providers in UAE is Smart Crowd, you can register through this link and get a discount of AED 250 for your first investment.

7. National Bonds of UAE:

Bonds are a way for governments and corporations to raise capital. You can earn money from bonds through:

• Interest payments on bonds, which usually happens twice a year in UAE.
• Growth in bond valuation, just like stocks.

However, bonds have a predefined period in which you can own them, such as a year or even up to 20 years, unlike stocks, which you can own as long as the company in question allows it. Bonds are considered less risky than stocks, but the profit potential is much less in comparison.

Residents and non-residents of UAE are eligible to purchase national bonds in the UAE, as long as they are 21 years old and above. In the case of minors, parents or a trustee can purchase government bonds on their behalf.

You can purchase UAE national bonds at the countries’ post offices (more than 700 branches) or conveniently online at National Bonds Corporation. There’s a minimum investment of AED 100 (at the time of writing) and no upper limit to how much you can purchase. You can also buy bonds for other countries, such as that of the US (considered one of the safest investments), through some online platforms explained below.

How to invest: Check out our National Bonds of UAE Guide: All You Need to Know

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8. High-Yields Saving Accounts in UAE Banks:

Savings accounts in UAE banks and off-shore offer a modest return on your money. Most saving accounts from banks offer less than 1% interest. 

However, using a bank for your savings is a better option than leaving your money with no interest in current accounts.

To get the best interest rates, always search for digital banks. These types of banks run most of their operations using artificial intelligence and chatbots; therefore, their operating cost is low. They can afford to provide high interest on saving accounts.

For example, Liv bank is a digital bank owned by Emirates NBD that pays an interest rate of 1.5% per annum for a savings account, which is considered very high compared to other banks in the UAE and even globally.

Tips for Investing in the UAE::

After deciding on how much you are willing to invest, here are some tips to help you achieve your goals and hopefully your financial freedom.

Invest in Different Options (Diversify)

As we have seen, every investment option has its advantages and disadvantages that can influence performance. Therefore, before deciding where to put your money, carefully evaluate your options to get the one that suits you. But, pick more than one investment choice, so you can always bank on another if one fails.

Consult A Specialist

Are you starting your investment journey and don’t know the subject or research appears too difficult? In that case, you can always consult a specialist to clarify all doubts and offer details about suitable investments for you in the UAE.

No matter how small your investment is, you can always reach out for a financial advisor in UAE. They will provide you with all available options for investing your money.

Check out our list of recommended financial advisors in UAE.

Be Patient

Patience is the name of the game when it comes to investing. Don’t be tempted to withdraw your profits to upgrade your lifestyle continuously. In most cases, it’s better to let your money produce even more by reinvesting it in your profit-making endeavors. Moreover, when you withdraw some investments ahead of time, you might lose some interest and all your initial efforts will be wasted.

Set a Saving Goals

With clear goals you want to achieve, you’ll be better off when looking at investments. Besides, you’ll develop long-term money habits that will benefit you. After setting your goal, whether it’s for vacation, college education for your kids, down payment on a house or retirement, work towards a set figure rather than having a vague idea of just saving more. Then, figure out what the money you save will do for you and what it will accomplish at the time of withdrawal.

Don’t Mix Business with Pleasure

When investing, try not to use your assets to satisfy your endeavors. For example, you may feel like you have more money to spend if you see the prices of your asset increasing. This upsurge can tempt you to satisfy your personal needs with money coming from your assets. Unfortunately, this mix can make you think you have even more money to spare and slowly but surely chip away from your investment portfolio.

Save On the Little Things

It might not seem much on a day-to-day basis add what you spend on menial things for a whole year, and the picture becomes clearer. We all waste our money on small things without even thinking. For example, say you use your vehicle every day to head to work, yet a bus or the metro will cost far less than what you spend on fuel and maintenance. If you add up what you’ll save if you stop using your car to other unnecessary expenses, the money you save could be put to another investment, maybe even into buying another car, which you can rent it out and generate additional passive income.

Read more: 9 Effective Ways to Save Money in Dubai

Invest Extra Income

You could come across some extra income on top of your fixed earnings or receive back an amount you had loaned before. If that’s the case, don’t get excited and spend everything on unnecessary things. Instead, even though it can be difficult, try and think long-term, putting that extra income into your investments to increase your profit.

How Can I Reach to the Financial Freedom in the UAE?:

Being financially free means money is no longer a cause of tension; you live a debt-free life with enough money for early retirement, and you never have to go to a job that you don’t like.

Although reaching financial freedom may seem difficult, but it is achievable when taking the right steps, having the mindset, and enjoying the journey.

Here are the steps you need to be taking to reach to the financial freedom:

1.Understand Where You Are

Without understanding your starting point, you can’t reach Financial Freedom. It can be frustrating to look at how much debt you have, how much savings you hold, and how much cash you need. Yet, it’s a precious jump in the right direction.

You might realize that you are still in the instability or survival phase. But it’s totally fine. As long as you start being aware of where you stand, you can make sure you are on the right track.

Now you know where you stand, it’s time to take a step further and move to the next level.

2. Set an emergency fund

Setting an emergency fund is the most crucial change you need to bring to your financial life. It’s not recommended to think about investing or buying any fancy stuff before setting emergency funds.

If your income doesn’t allow you to set any money aside, you need to re-evaluate your expenses and lifestyle and make the necessary adjustments. You can start to gradually build that fund by setting aside a small amount of your monthly income, any unexpected income, or bonuses until you have a worth of 3 – 6 months of your cost of living basics.

Having an emergency fund ensures that you have enough money on hand to deal with any unexpected incidents. You should have at least three – Six months of income saved in your bank. (REPETITIVE DELETE ONE OF THEM) Whether you lost your job, got sick, or had an urgent major repair, this will allow you to continue to pay the bills.

Unexpected and sometimes bad things might happen in life, that is how it is, When the time comes, you better be prepared.

Now you have your emergency funds aside, and you made it to the security zone. It’s time to step up to the next level.

3. Get rid of Consumer debts

Although some types of debts can expand your financial opportunities, unfortunately they do not support your financial development in the long run. Keeping in mind that all those payback dates, stressing out about debts are something you would want to avoid in the first place.

While it is understandable that there are situations in which debt is unavoidable, in the long run, you need to terminate it from your life. Paying back loans and credit cards should be your a number one priority, as your financial freedom can only start when you owe nothing to anybody, excluding yourself!

In this stage, you are only required to pay off your consumer debts and not your mortgage (if you have one) since paying off the mortgage at this stage is unrealistic.

Now you are free of debt and made it to the Debt-free level. Let’s go one step up and discover the next level

4. Build a Monthly Systematic Investment

After setting up emergency funds and paying your consumer debts, it’s time to pay yourself and start investing in your future.

By paying your loans and credit cards, you are now able to free up a part of your monthly income. So what are you going to do with that extra money?

In many cases, investing small amounts for the long term has proven to be better than investing a large amount as a lump sum. For example, monthly and consistent investment in the stock market will do miracles over the years.

Remember, this is long term investment; you don’t have to look at the stock prices every day or even every week; keep on investing.

By doing so, you are spreading your capital over tens and even hundreds of monthly payments, meaning that it won’t matter if you invested in some stocks for one month and prices went down because you will be buying again next month with the low price.

Once your investments start to grow and generate income, you can comfortably say that you are at the security level.

5. Get Insured

Life is unpredictable, and when you least expect it, it has a way of tossing surprises at you. To be completely able to cope with life contingencies, then you need to consider getting insured.

Your financial status can be affected in a moment by unforeseen incidents; no matter how much you earn or how much you have invested, it can all be wiped off. So, covering yourself, your family, and your belongings with insurance is the perfect way to become financially confident and anxiety-free.

6. Create Additional Sources of Income

Now that you have your monthly investments growing and paying for your necessary expenses, you still rely on your job to pay for your lifestyle.

It is time to step further and start building different income sources, passive incomes that pay you while you sleep.

It’s not that simple, and it doesn’t come overnight, it takes a lot of effort, commitment, and hard work, but once you make the necessary setup the money should flow passively while you enjoy your time and spend it doing the things you love.

Having more than one source of income gives you the peace of mind that you would still be fine even if you lose one source because you have other sources to cover it up.

Now, after building multiple sources of income, it means you made it to the independence level. You are one of few people who made it to this level because of your commitment, hard and smart work.

You are one step away from reaching the financial freedom you have always dreamed about.

7. Manage your Wealth and Enjoy Life

Congratulations. You made it to financial freedom! You have entirely shifted from thinking and worrying about your income to managing your investments, cash flows, and planning for the next generation’s finances.

With more free time and less stress, you can spend more time with your beloved ones, travel, find your passion, and do the things you love.

Final Thoughts:

The UAE offers many investment opportunities, ranking favorably among many Middle Eastern countries. The region is quite beneficial for investors because of a supportive regulatory environment, and political stability. Moreover, there’s no personal income tax in the UAE or capital gains tax on the disposal of securities or real estate by an individual.

While in the UAE, you have the opportunity to also invest in local companies and those based overseas. It’s essential to understand what you are investing in through in-depth research since that’s the best way to gain from your efforts. Chart the market rigorously, look at buyer sentiments and historical price charts for particular stocks, properties, or commodities. Fortunately, professional advisers can hold your hand through the various investment methods laid out in this guide and advise you accordingly.