What are the best investments based on your salary bracket?

The principle of “one size fits all” does not apply in the world of personal finance as people's circumstances, earning potential and risk appetite are unique, according to financial experts.

Although a person’s salary is a significant factor that influences their investment choices, it is not the sole determinant. Other factors include personal financial goals, risk tolerance and time horizon, experts add.

“The income bracket doesn’t influence what you can invest in, your savings rate does,” says Carol Glynn, founder of Conscious Finance Coaching.

Steve Cronin, founder of DeadSimpleSaving.com, agrees and says salary levels are almost irrelevant compared to what you can save and invest each month.

Someone earning Dh10,000 ($2,722) and spending Dh5,000 has more to invest than another person earning Dh40,000 and spending Dh38,000, he says.

However, 67 per cent of both millennials and Generation Z said their salary is the most important factor in building wealth, according to a survey of more than 1,000 Americans last month by financial services company Empower.

Younger generations chose salary above other wealth-building factors, such as being debt-free, job stability and living below their means, the survey found.

But just how much of your income should go towards investing?

Most personal finance experts recommend the 50:30:20 approach for cash flow planning, which suggests that an individual sets aside 20 per cent of their income for savings or other financial goals.

“My recommendation is that the individual first starts working on an emergency fund, which can be anything from three to six months of their monthly living expenses,” says Ms Glynn.

“Ideally, this money is parked in an interest-bearing, but liquid bank account. There are some great options on the market at the moment, with some offering up to 6 per cent interest per annum.”

For those looking to park money that is earmarked for the short to medium term – between two and five years – Ms Glynn recommends a “safe investment” such as a high-interest savings account, low-cost bank or government bonds, or term deposit.

If you don’t need your savings for more than five years, she suggests exchange-traded funds. But it needs to be a long-term plan and all dividends must be reinvested during this time to allow for the power of compounding to work its magic, she says.

“While salary is a significant determinant, it’s essential to align investments with personal goals, risk tolerance, and market conditions,” says Joseph El Am, general manager of digital wealth manager StashAway Mena.

People looking to secure their financial future through investing must start early to benefit from the power of compound interest.

They should also opt for a systematic investment plan to reduce the impact of market volatility, diversify across various assets to manage risk and set clear goals to help decide on an appropriate risk-return strategy, according to Vijay Valecha, chief investment officer at Century Financial.

However, before investing, individuals must address their debt and build an emergency fund to avoid selling their investments during market downturns, he advises.

“Young, single individuals with high disposable income can opt for aggressive investments such as equities, real estate and commodities that have high growth potential [but also higher risk],” Mr Valecha says.

“However, family-orientated earners in their late 30s or early 40s may choose a more moderate strategy. As the disposable income bracket increases, the portfolio can shift towards a more aggressive approach, provided the funds are not required in the near term. Likewise, as one nears retirement, a gradual shift to a conservative approach is advisable.”

Here, financial experts identify investment assets for people in different salary brackets.

Salary bracket: Dh5,000 to Dh10,000 per month

For those in this income bracket with a limited disposable income and lower risk tolerance, opting for safer investment options is prudent to ensure steady savings growth, Mr Valecha suggests.

“A savings account is an essential foundation for anyone starting their financial journey. While the principal amount is secure, it doesn’t earn much interest,” Mr El Am from StashAway says.

“As a rule of thumb, keep about one to two months of expenses in your bank account. Holding too much cash in your bank means that your savings are decreasing in value due to inflation.”

Open a basic savings account with local banks such as Emirates NBD, Abu Dhabi Commercial Bank, or Dubai Islamic Bank. These accounts offer modest interest rates and easy access to funds, Mr Valecha says.

Consider investing in UAE National Bonds, which are low-risk government bonds offering competitive returns. They’re accessible to UAE residents and the minimum investment is typically affordable, he adds.

He also cites National Bonds’ Second Salary savings plan, which allows individuals to make a minimum monthly investment of Dh1,000 per month for at least three years, and receive a monthly return of approximately Dh1,125 for three years.

“It fosters a savings habit and offers a 4 per cent return, a better alternative to low-yield savings accounts,” he says.

UAE investors can also explore US Treasury bills yielding 5.4 per cent with a minimum investment of $1,000, Mr Valecha notes. They can buy these bills from any companies registered with the Securities and Commodities Authority.

“These bonds are AAA-rated for safety and serve as a secure option for short-term cash parking or earning returns on savings.”

A savings account is an essential foundation for anyone starting their financial journey, experts say. Victor Besa / The National

Salary bracket: Dh10,0000 to Dh20,000 per month

Fixed deposits are a preferred choice for many as these offer better interest rates than savings accounts, ensuring the money grows, albeit slowly, Mr El Am points out.

Explore longer-term fixed deposits with higher interest rates. Some banks may offer promotional rates for larger deposits or longer tenures, according to Mr Valecha.

“Think about investing in sukuk or Islamic bonds that provide regular income and adhere to Sharia principles. Various UAE banks offer sukuk investments,” he adds.

Both corporate and government bonds offer steady returns with varying degrees of safety. Bonds can also offset some of the volatility of stocks in a balanced portfolio, Mr El Am says.

Meanwhile, he also recommends investing in mutual funds for a diversified portfolio. Depending on one’s risk appetite, one can choose from equity, debt or hybrid funds.

“Consider investing in balanced mutual funds with a mix of equities and fixed income. Look for options from reputable asset management companies like Franklin Templeton, Invest AD, or Emirates NBD Asset Management,” Mr Valecha says.

Mr El Am also highlights money market funds, which invest in short-term debt securities.

They’re a suitable option for those seeking a higher return than savings accounts but with ultra-low risk, he says.

Fixed deposits are a preferred choice for many as these offer better interest rates than savings accounts, ensuring the money grows, albeit slowly

Joseph El Am,
general manager, StashAway Mena

Individuals in this salary bracket can also consider allocating a small portion to US-based equity indices and ETFs like the SPX 500 and SPDR S&P 50 ETF, known as SPY, for diversification, according to Mr Valecha.

The SPX 500 tracks the top 500 US companies, while SPY allows investments in smaller denominations, he says.

“ETFs track indexes, commodities, or bonds and are traded like a stock on an exchange. They offer diversification, much like mutual funds, but with the added advantage of daily liquidity and often lower fees,” Mr El Am says.

Diversified stock market investing is the fastest way to grow your money over the long term, Mr Cronin says.

He recommends a globally diversified stock ETF and a global government bond to stabilise the portfolio against market shocks, such as a crash.

“Sensible stock market investing is for any salary level these days, as long as you can keep transfer costs and platform costs down,” he adds.

Real estate investment trusts, which allow you to purchase property without the hassles of ownership, could be another option, says Mr El Am.

These assets help you earn from the property boom without getting bogged down by tedious administrative tasks, property maintenance, and more, he adds.

“UAE-listed Reits, such as Emirates Reit and ENBD Reit, allow you to indirectly participate in real estate and earn rental income,” Mr Valecha says.

UAE Salary Guide 2023 – in pictures

Salary bracket: Dh20,000 to Dh30,000 per month

Executives, senior managers and business owners often fall into this category, Mr El Am says.

While a well-balanced portfolio of equities and bonds remains key, you now also have the resources to explore more diverse investments, he adds.

He highlights property for its capital appreciation potential and ability to serve as a source of passive income through rent.

“Those planning to settle in the UAE can consider investing in real estate for steady rental yields. However, given the potential global economic challenges and rising interest rates, the sector may not be able to replicate the stellar performance seen in the last two years,” Mr Valecha says.

“Investors in this bracket, with higher disposable income and risk appetite, can allocate a significant portion to both local and international equity markets. They can consider local indices like DFM and ADX, as well as US indices like SPX 500 and Nasdaq 100. Direct stock investments in prominent large-cap US companies are also an option.”

The allure of buying individual stocks and watching them grow cannot be understated, says Mr El Am.

However, it’s a volatile market and one needs to invest substantial time and resources to evaluate each stock. Even the best fund managers can get it wrong from time to time, he warns.

Mr El Am also cites alternative investments, such as cryptocurrencies and collectibles like art and vintage cars, to act as a hedge against traditional investments.

Those planning to settle in the UAE can consider investing in real estate for steady rental yields

Vijay Valecha,
chief investment officer, Century Financial

Professionals in this salary range can also consider investing in regional and global equity mutual funds that match their risk tolerance and financial goals, Mr Valecha suggests.

He also recommends diversifying a portfolio with corporate bonds or fixed-income instruments for a stable income with relatively lower risk compared with equities.

Salary bracket: Dh30,000 to Dh40,000 per month

Investors in this bracket can consider direct investments in stocks on UAE exchanges and international bourses like the Nasdaq and New York Stock Exchange, Mr Valecha suggests.

“High-growth stocks with substantial future potential can be explored. Research is crucial before stock selection, in addition to regular SIPs in benchmark indices,” he explains.

He also recommends exploring foreign investment opportunities like offshore mutual funds, bonds, or real estate investments for diversification.

“Contribute to a company-sponsored employee provident fund or a similar retirement savings plan. Maximise contributions to leverage employer matching if available,” he adds.

Salary bracket and assets to invest in

Dh5,000 to Dh10,000 (per month)

Emergency fund
Savings account
National Bonds
National Bonds Second Salary savings plan
US Treasury Bills

Dh10,0000 to Dh20,000

Fixed deposits
Sukuks
Government or corporate bonds
Mutual funds
Money market funds
Exchange-traded funds
Real estate investment trusts

Dh20,000 to Dh30,000

Real estate
Equity markets
Equity mutual funds
Fixed-income instruments
Alternatives like cryptocurrencies, art and vintage cars

Dh30,000 to Dh40,000

Direct investments in stocks
Offshore investments
Retirement savings

Source: StashAway Mena and Century Financial

THE SPECS

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School counsellors on mental well-being

Schools counsellors in Abu Dhabi have put a number of provisions in place to help support pupils returning to the classroom next week.

Many children will resume in-person lessons for the first time in 10 months and parents previously raised concerns about the long-term effects of distance learning.

Schools leaders and counsellors said extra support will be offered to anyone that needs it. Additionally, heads of years will be on hand to offer advice or coping mechanisms to ease any concerns.

“Anxiety this time round has really spiralled, more so than from the first lockdown at the beginning of the pandemic,” said Priya Mitchell, counsellor at The British School Al Khubairat in Abu Dhabi.

“Some have got used to being at home don’t want to go back, while others are desperate to get back.

“We have seen an increase in depressive symptoms, especially with older pupils, and self-harm is starting younger.

“It is worrying and has taught us how important it is that we prioritise mental well-being.”

Ms Mitchell said she was liaising more with heads of year so they can support and offer advice to pupils if the demand is there.

The school will also carry out mental well-being checks so they can pick up on any behavioural patterns and put interventions in place to help pupils.

At Raha International School, the well-being team has provided parents with assessment surveys to see how they can support students at home to transition back to school.

“They have created a Well-being Resource Bank that parents have access to on information on various domains of mental health for students and families,” a team member said.

“Our pastoral team have been working with students to help ease the transition and reduce anxiety that [pupils] may experience after some have been nearly a year off campus.

"Special secondary tutorial classes have also focused on preparing students for their return; going over new guidelines, expectations and daily schedules.”

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UAE squad

Humaira Tasneem (c), Chamani Senevirathne (vc), Subha Srinivasan, NIsha Ali, Udeni Kuruppuarachchi, Chaya Mughal, Roopa Nagraj, Esha Oza, Ishani Senevirathne, Heena Hotchandani, Keveesha Kumari, Judith Cleetus, Chavi Bhatt, Namita D’Souza.

Groom and Two Brides

Director: Elie Semaan

Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla

Rating: 3/5

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UAE FIXTURES

October 18 – 7.30pm, UAE v Oman, Zayed Cricket Stadium, Abu Dhabi
October 19 – 7.30pm, UAE v Ireland, Zayed Cricket Stadium, Abu Dhabi
October 21 – 2.10pm, UAE v Hong Kong, Zayed Cricket Stadium, Abu Dhabi
October 22 – 2.10pm, UAE v Jersey, Zayed Cricket Stadium, Abu Dhabi
October 24 – 10am, UAE v Nigeria, Abu Dhabi Cricket Oval 1
October 27 – 7.30pm, UAE v Canada, Zayed Cricket Stadium, Abu Dhabi

October 29 – 2.10pm, Playoff 1 – A2 v B3; 7.30pm, Playoff 2 – A3 v B2, at Dubai International Stadium.
October 30 – 2.10pm, Playoff 3 – A4 v Loser of Play-off 1; 7.30pm, Playoff 4 – B4 v Loser of Play-off 2 at Dubai International Stadium

November 1 – 2.10pm, Semifinal 1 – B1 v Winner of Play-off 1; 7.30pm, Semifinal 2 – A1 v Winner of Play-off 2 at Dubai International Stadium
November 2 – 2.10pm, Third place Playoff – B1 v Winner of Play-off 1; 7.30pm, Final, at Dubai International Stadium

UFC Fight Night 2

1am – Early prelims

2am – Prelims

4am-7am – Main card

7:30am-9am – press cons

MATCH INFO

Day 2 at Mount Maunganui

England 353

Stokes 91, Denly 74, Southee 4-88

New Zealand 144-4

Williamson 51, S Curran 2-28

The rules of the road keeping cyclists safe

Cyclists must wear a helmet, arm and knee pads

Have a white front-light and a back red-light on their bike

They must place a number plate with reflective light to the back of the bike to alert road-users

Avoid carrying weights that could cause the bike to lose balance

They must cycle on designated lanes and areas and ride safe on pavements to avoid bumping into pedestrians

Most sought after workplace benefits in the UAE

Flexible work arrangements
Pension support
Mental well-being assistance
Insurance coverage for optical, dental, alternative medicine, cancer screening
Financial well-being incentives

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Sim swap frauds are a form of identity theft.

They involve criminals conning mobile phone operators into issuing them with replacement Sim cards, often by claiming their phone has been lost or stolen

They use the victim's personal details - obtained through criminal methods - to convince such companies of their identity.

The criminal can then access any online service that requires security codes to be sent to a user's mobile phone, such as banking services.

While you're here

Gavin Esler: Will 2021 be Boris Johnson's worst year?

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LUKA CHUPPI

Director: Laxman Utekar

Producer: Maddock Films, Jio Cinema

Cast: Kartik Aaryan, Kriti Sanon, Pankaj Tripathi, Vinay Pathak, Aparshakti Khurana

Rating: 3/5

At a glance

Fixtures All matches start at 9.30am, at ICC Academy, Dubai. Admission is free

Thursday UAE v Ireland; Saturday UAE v Ireland; Jan 21 UAE v Scotland; Jan 23 UAE v Scotland

UAE squad Rohan Mustafa (c), Ashfaq Ahmed, Ghulam Shabber, Rameez Shahzad, Mohammed Boota, Mohammed Usman, Adnan Mufti, Shaiman Anwar, Ahmed Raza, Imran Haider, Qadeer Ahmed, Mohammed Naveed, Amir Hayat, Zahoor Khan

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Sarfira

Director: Sudha Kongara Prasad

Starring: Akshay Kumar, Radhika Madan, Paresh Rawal

Rating: 2/5

If you go

The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.

The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.

Museum of the Future in numbers

78 metres is the height of the museum
30,000 square metres is its total area
17,000 square metres is the length of the stainless steel facade
14 kilometres is the length of LED lights used on the facade
1,024 individual pieces make up the exterior
7 floors in all, with one for administrative offices
2,400 diagonally intersecting steel members frame the torus shape
100 species of trees and plants dot the gardens
Dh145 is the price of a ticket

The five pillars of Islam

1. Fasting

2. Prayer

3. Hajj

4. Shahada

5. Zakat

The biog

Favourite book: Homegoing by Yaa Gyasi

Favourite holiday destination: Spain

Favourite film: Bohemian Rhapsody

Favourite place to visit in the UAE: The beach or Satwa

Children: Stepdaughter Tyler 27, daughter Quito 22 and son Dali 19