What many people fail to realise is that there is a difference between investments and smart investments.
You need to have the right mindset and the aim to create wealth should underpin all your financial decisions.
To be a smart investor, you should allow your money to do the work for you and not the other way around.
Market volatility exists, but there are a few fundamental tips that are evergreen.
These simple, yet effective, tips are a staple for successful investors across the globe and can help you embark on the journey to achieve financial autonomy.
Set clear and realistic objectives
The primary step to investing smartly is to blueprint what goals and objectives you would like to achieve.
Once your objectives are in sight, it will become easier to gauge how much you need to invest and the tenure you wish to invest for, whether short or long term.
After identifying what you want to achieve, you can explore different investment strategies for your goals and how to achieve them.
However, it is imperative to understand that an overcomplicated set of goals through single stream investments can also lead to saturation, not only for the investment and wealth but also for yourself.
So, be clear about what you plan to achieve, the duration you wish to achieve it in and the viability of your objectives.
You can always take a moment to re-strategise if your current plan is too difficult to execute and change your goals to more realistic ones.
Start investing early
“The early bird gets the worm” and investment metrics agree.
When you start investing early, you give your investments enough time to grow through the power of compounding.
You don’t have to invest an exorbitant amount, even simple but safe investments can help you create more wealth for yourself, leading to more financial security in the future.
No matter your age, it’s never too late to start.
Save and then invest
Saving for rainy days is crucial, but to ensure you have enough to sustain your financial goals, investing is imperative.
You can use the 50:30:20 budgeting rule, allowing you to spend 80 per cent of your income on your necessities and wants, while the rest can simultaneously be used for investing.
Moreover, making investments based on borrowed funds is not the right choice.
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You should only invest from your savings rather than relying on borrowed money or loans.
Even saving small amounts every month can lead you to having a big investment portfolio that is sufficient to help you through turbulent times.
Diversify your portfolio
Diversification is key to generating greater wealth.
The concept is simple, yet effective. Instead of relying on just one investment throughout your life, diversify.
This can also act as a safety net in the event of your investment plummetting as other investments will recuperate some of the amount lost.
Seasoned investors know that it is a strict “no” to invest in just one asset class. It is ideal to mix and match different assets.
There will be losses, but with the right temperament and mindset, you can learn from these losses and apply the acquired knowledge to avoid market pitfalls
Shivansh Rachit,
board member and founder, Hedge & Sachs
This not only helps with premium returns, but also ensures better liquidity and helps to navigate market volatility.
Be a risk-taker
Last but not the least, be a risk-taker. You should be courageous and willing to take risks to grow your wealth.
There will be losses, but with the right temperament and mindset, you can learn from these losses and apply the acquired knowledge to avoid market pitfalls.
While being cautious is good, when it comes to investing, it is vital to have the mindset of a risk-taker.
If you are completely hesitant to take risks and do not want to venture into anything that involves risk, you may end up making big mistakes and lose out on a lifetime of gains.
You only need to be focused and willing to invest, and you’re already halfway there!
Shivansh Rachit is board member and founder of asset management company Hedge & Sachs
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Should late investors consider cryptocurrencies?
Wealth managers recommend late investors to have a balanced portfolio that typically includes traditional assets such as cash, government and corporate bonds, equities, commodities and commercial property.
They do not usually recommend investing in Bitcoin or other cryptocurrencies due to the risk and volatility associated with them.
“It has produced eye-watering returns for some, whereas others have lost substantially as this has all depended purely on timing and when the buy-in was. If someone still has about 20 to 25 years until retirement, there isn’t any need to take such risks,” Rupert Connor of Abacus Financial Consultant says.
He adds that if a person is interested in owning a business or growing a property portfolio to increase their retirement income, this can be encouraged provided they keep in mind the overall risk profile of these assets.
