It’s common for people to feel confused or intimidated by the idea of investing. to generate income.
Beginners often feel lost in the noise of advice and don’t know what their first move should be. They feel overwhelmed about where to begin their investing journey
It’s important to start with sources that teach the basics of simple investing. There are plenty of free online resources, but novice investors need to be careful about who they are learning from and what their motives are, says Carol Glynn, founder of Conscious Finance Coaching.
“YouTube can be a great resource, but I would recommend starting with very basic courses that focus on long-term investing strategies over chasing short-time quick wins. Don't leap straight into complex investing until you have understood and mastered the basic concepts and habits,” she says.
“Seek out independent providers whose motivation is to educate instead of free providers who earn based on commissions as there is a risk their advice will be biased towards the products they earn commissions from.”
Blair Hoover, founder of advisory Choose Your Own Finance, says the single best resource for a beginner in the UAE is SimplyFI Index Investing and Financial Independence, a non-profit Facebook group. The community is volunteer-run, free and rigorously moderated to ensure all content adheres to global best practices in passive, long-term investing, she adds. New investors can download their Getting Started Guide directly from the pinned posts.
Ms Hoover also cites personal finance author Andrew Hallam's book The Global Expatriate’s Guide to Investing as a foundational read and the “perfect starting point” for many beginners.
Elie Irani, a member of the Simply FI group, recommends Millionaire Expat, a book by Mr Hallam. “It's an easy-to-read book and beginner-friendly. It teaches you how to invest sensibly and build wealth for your retirement while avoiding the financial sharks in the region. I cannot recommend it highly enough!” he says.
He also recommends the Bogleheads forum, which has free resources and investing advice following the simple investment principle pioneered by John C Bogle. The site also includes some good resources for non-US investors, which apply to most people in the Middle East, Mr Irani adds.
Where to start investing
Personal finance experts advise first-time investors to keep things simple.
Steve Cronin, a financial independence coach and founder of DeadSimpleSaving.com, says although there are many asset classes such as real estate, crypto, private equity and commodities, you should ignore most of these and keep things simple.
He suggests people first understand why they are investing, with that ideally being for long-term growth to support their future. It makes sense to get a low-cost global stock fund, probably an exchange-traded fund (ETF). Also, a global government bond fund or gold fund for some downside protection if the stock market slides temporarily, Mr Cronin says.
These ETFs can be bought using a trading account, according to Mr Irani.
Ms Glynn says ETFs are often a great starting point because they are easy to access, easy to understand, low-cost and give instant diversification by investing in hundreds of companies at once. The key is to choose asset classes that match your goals, values and tolerance for risk, rather than chasing what’s popular in the hope of short-term gains, she says.
Ms Hoover says that if your goal is to grow wealth over the long term – 10 years or more − you must be investing in the stock market. There is no other asset class that is as safe or as profitable over multi-decade time horizons. Stocks are the best tool for funding a long, comfortable retirement, she says.
“Many people fear stocks because they equate them with risky betting on individual companies. Taking on this risk is unnecessary because we now have access to index funds. The single best long-term investment is a low-cost, whole-market index fund,” she says.
“Decades of data show that active strategies – like picking individual stocks, day trading, or actively managed mutual funds – consistently underperform a simple index fund over the long run, due to the drag of high fees and the impossibility of predicting the future.”
Ms Hoover recommends that those who are only starting invest 80 per cent of their savings (after establishing an emergency fund) into a single low-cost global stock index fund, and 20 per cent into a high-quality bond or sukuk ETF.
Mr Cronin says real estate “requires a much larger commitment if you want to buy a property to rent out.”
“The other asset classes like crypto, precious metals and private equity all sound fun but they can get more exciting than you can handle,” he says.
“Invest some small amounts in these if you want to, but don't let the 'fun stuff' distract you from building up some solid and boring investments in a stock fund and a bond fund.”
Platforms to start investing
In the UAE, investors can open accounts with well-regulated international brokerage platforms such as Interactive Brokers (IBKR).
founder, Conscious Finance Coaching
Ms Hoover says if you have the time and desire to learn and manage your own portfolio, it is highly recommended to use a global, low-cost broker such as IBKR. This route offers the lowest fees. Investors choosing this path often seek support from a fee-only coach to create a comprehensive plan and learn how to navigate the platform, she shares.
Many UAE banks also offer investment products, but they often come with higher fees and limited access to global markets, so it’s important to compare costs and market accessibility, Ms Glynn says.
If you have limited time and prefer a hands-off approach, a UAE-based platform such as Sarwa Invest is an excellent option as it provides robo-adviser service that handles the investing for you. While you will pay slightly higher fees than the do-it-yourself route, it allows you to get started immediately with minimal effort, Ms Hoover explains. This can be a great starting point while you gain confidence, she says.
A robo-adviser is an online investment platform that builds and manages an investment portfolio for you automatically. Instead of choosing individual stocks or funds yourself, you answer a few questions about your goals, time horizon and risk appetite. The platform then uses algorithms to create a diversified portfolio, usually made up of ETFs, and adjusts it for you over time.
Ms Glynn warns that it is essential to choose a regulated platform, and beginners should always verify that the broker is licensed in a recognised jurisdiction.
Besides IBKR, Mr Irani also recommends Saxo Bank, a Danish investment broker, and Swissquote, a Switzerland-based investment broker. All the three brokers have representative offices in the UAE.
Mr Cronin suggests avoiding platforms linked to your bank to avoid building up too much exposure. He also avoids new trading apps or ones focusing mainly on contract for difference (CFDs) and foreign exchange trading. You might be tempted to start trading these, but this will almost certainly make you lose money, he warns.
Mistakes to avoid
Mr Cronin asks novice investors to make sure they have enough cash in a savings account to cover three to six months’ expenses, so they don't have to pull money out of the stock market during a crash.
He suggests other things to avoid include: Don't be tempted by your bank or adviser to invest in a product that locks you in for any period of time, or that has fees above 1 per cent per year; and don't invest in anything that is promised to make more than 10 per cent per year, as it is “likely very risky or a scam”.
“If in doubt, ask on one of the many UAE-based Facebook groups. That way you can learn from others' mistakes,” he explains.
“Don't get the fear of missing out and feel you have to invest in something just because it's going up in value or you met someone who made lots of money out of it – the price could reverse very easily.
“Don't let someone convince you that investing requires stock picking, watching charts daily, or copying their investments. Proper investing takes five minutes per month, and you just need to buy the same thing at the same time each month. Keep it simple.”
Ms Glynn says waiting too long to start is one of the biggest mistakes. You don’t need to pick the “perfect” investment or time the market. Start small with a globally diversified ETF, start early and focus on consistency. Stay focused on long-term goals and review your portfolio only a few times a year, she recommends.
Ms Hoover suggests avoiding any investment product tied to an insurance contract. These often have high, hidden fees and long lock-in periods that primarily benefit the salesperson. Keep investments separate from banking and insurance to minimise fees, she warns.
“Always confirm that any company you are giving money to is properly registered as a broker with a regulator like the Dubai International Financial Centre or the Abu Dhabi Global Market,” she says.
“It’s tempting to buy trendy assets like individual stocks or specific crypto coins. Over the long run, even the best hedge fund managers cannot beat the returns of a simple, diversified index fund. If you must gamble, keep those riskier holdings to no more than 5 per cent of your total portfolio.”
Mr Irani suggests not investing if you still have credit card debt or any other high-interest debt. He also suggests not investing in random ETFs or in specific countries or sector ETFs that have performed particularly well lately.
Due to what is known as reversion to the mean, any investment that has outperformed the broad market over a period of time is bound to underperform in the following period, he warns.
