The best time to start investing, the old adage goes, was 20 years ago. The second-best time is now. It’s advice that holds true for stocks and other asset classes that benefit from compound interest, whether in the UAE or elsewhere. As you probably learned in school, the more time you stay invested, the higher your returns are likely to be – provided you reinvest any profits.
Yet, many UAE residents shy away from investments –they’re intimidated by financial markets, because they think they don’t know enough or don’t know where to begin, or because they believe they need to start with a specific amount. But whether it’s a fear of making the wrong decision, or analysis paralysis sparked by a surfeit of choice, there’s no reason to hold yourself back.
This article busts some popular myths and outlines a short plan to determine an investment strategy for the novice investor in the UAE. Read on to find out how you can get started.
Myth: “I need a minimum of $10,000 to begin investing.”
Truth: Not at all. With a systematic investment plan or SIP from Citibank, you can begin with as little as $100. That’s approximate equivalent of dinner for two people at a nice restaurant in the UAE.
Myth: “I need to pay down my debts first.”
Truth: This statement holds true for some debts, but not for all. You should indeed pay down high-interest debt, such as credit cards, first before making any investments. However, for lower-value loans, such as home mortgages, you may be able to make more money on the stock market than any savings you would gain from paying down the debt. What you need to do is determine the arbitrage between the rate of interest on your loan and returns from investment. If you see a higher return from investing in stocks – or even fixed deposits – than the interest rate, you may want to think about taking on more debt. But you also must factor in the chances of loss when it comes to investments. Hence, assess your appetite for risk and based on that, make your decision.
Myth: “I don’t know anything about investments.”
Truth: Everybody had to start somewhere – even some big-name investors started from nothing. If you don’t understand the basics, or didn’t learn them in school, it’s easy to get some financial help. Thanks to online tutorials on platforms such as YouTube or professionals whether individuals or through a bank; the knowledge barriers to investing in the stock market have been lowered considerably. Spend a few weeks taking online courses and expanding your knowledge through reading. Download app and start with a virtual portfolio – you have literally nothing to lose in this case.
When you maintain $200,000 or more of total relationship balance with Citi, you will get a dedicated Citigold Relationship Manager who can handhold you in every step of your investing journey. Alternatively, you can do it yourselves, buying and selling of mutual funds and other securities through Citibank Online.
Myth: “I don’t know where to begin.”
Truth: You’ve got to learn to walk before you can run. Investing is a step-by-step process, but if you don’t take those baby steps, you’re never going to be able to progress. Again, financial advice and education can help. Then explore the different investment options such as exchange-traded funds (ETFs), where you invest a small amount of money regularly over time. Consider discussing your financial management to a personal finance advisor who works for you. and is not on commission.
Myth: “I don’t trust financial advisors.”
Truth: You’re right not to trust the man who offers to sell you the Golden Gate Bridge at a discount, but not all financial advisors are frauds. Do your research before taking anyone’s advice. Ask your friends and family for recommendations. Call your bank and ask to speak to a financial advisor. Speak to a few different advisors and evaluate their advice against the standard rules: does the advisor make a commission? Are you getting the same advice from multiple sources? What is the contrarian advice? Approach investing the way you buy a car – with a lot of questions and a lot of cross-checking, ensuring you keep control of your money all the while.