While women have the know-how to make sensible and profitable investment decisions, they are hesitant about doing so. These are the findings made in The National's Money section this week.
According to a Fidelity Investments study carried out last year, 72 per cent of women don’t feel confident about selecting financial investments on their own. With this in mind, here Dubai-based Maleeha Bengali, a portfolio manager & wealth management consultant and founder of MB Commodity Corner, a trading and investment newsletter, reveals how novice women investors can get started:
How do I know how much to invest?
If you need cash in the next two months, don’t invest it. If you have about one year, that’s a great start. You first need to ask yourself ‘how much liquid wealth do I have today?’ Outside of your daily expenses, how much of that liquid wealth is spare? How much are you willing to invest?
Now you ask yourself ‘how old am I?’ ‘When do I think I will retire?’ Say to yourself ‘I want to have x amount of dollars every month when I retire’, and then start working your way backwards to determine how much you would need to invest today and what sort of return you would need to generate each year to reach that amount for the future. It’s important that you have an expectancy of when you will need that nest egg back. What are your obligations? Once you answer these questions, you can then decide what product matches your investment needs.
Should I opt for a financial adviser, or go it alone?
It depends on your appetite for risk, your knowledge of markets and if you have the time to keep an eye on your investments every day. If you do invest it yourself, read a lot of information. You can put your money in index trackers by opening an ETF account with any broker, it’s easy. If you are starting out, don’t get involved in complicated markets with high levels of uncertainty, despite the potentially higher rate of return they offer, as the risk is very high when you’re investing in Japan, China or emerging markets. Instead, buy something liquid and tangible. But if you want something with 10 or 12 per cent returns then give your money to a financial adviser or wealth manager who has training in making investment decisions. For that you pay a fee, but you can get back good returns. Advisers provide peace of mind for people who do not have the financial acumen, and charge fees for that – it’s the same as how I go to fancy restaurants because I can’t cook. If you do go with a financial adviser, read the fine print, ask them how long your money is tied up for and exactly how much you will be paying in fees. If you’re making 10 per cent but you’re paying 5 per cent in fees, it’s a worthless product. Put them on the spot, and make them work for those fees.
What common misconceptions do women have when it comes to investing?
One of the biggest is the fear of investing in equities. Women are scared they will lose all their money. But in the last ten years, equities have outperformed the most, we are talking 113 per cent over that time period. It is also a lot more volatile though, and this is the biggest hurdle I face when I talk to women about equities. But not all equities are the same. Some have very high growth and high return and some are very safe with slow growth. It’s a great way to diversify your wealth. It’s not about what the investment looks like next month, but over the next few years.
The markets are rocky right now. How do I know what’s a safe investment?
My opinion is that you should not have any investments tied up right now, because there is currently so much opportunity out there. Do not lock your money away for five or 10 years because in the current low interest rate environment you will not be making the most out of your money investing in a product that provides very low interest rates. If you tie up to a product for the long term, currently you will get 2 per cent or 3 per cent. This is the time to keep your wealth liquid and open to various options available.
What about gold?
If you think that there is going to be a recession in the next five years, buy gold. I do not take that view. In my opinion it is an expensive asset class. At the moment interest rates are very low but the moment they go up, one does not own gold. The market is currently experiencing wild swings as investors debate between a recovery and a potential recession in the global economies. But the view is pretty much that there is robust global economic growth. This sort of volatility presents great opportunities for active portfolio managers like us who are able to maximise the returns of their portfolio by optimising on displacements like this in this market.
pf@thenational.ae
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