With Dh1million to invest and the advice of her brother who made a fortune on the stock market at her disposal, Noura Ahmad thought she was on to a good thing.
Sadly, she now wishes she had never sought her brother's counsel.
He advised her to use her Dh1 million savings to buy stock at Dh0.70 a share, which she ended up selling for less than a third of what she paid.
“My five-year savings became Dh200,000. I lost Dh800,000 because I blindly trusted my brother,” said Ms Ahmad, who asked for her name to be changed, at a financial literacy session during last month’s 19th Naseba Global Women in Leadership Economic Forum.
The lesson here is simple: it is vital for women to become financially literate to manage their money. And do not blindly trust others to invest it on your behalf without double checking their credentials and advice first, say two women who head up family offices and manage vast sums on behalf of the ultra wealthy: Ida Beerhalter, co-head, IOME Private Office, a private investment office based in Riyadh, Saudi Arabia, and Dimple Sahni, senior director impact investing at Anthos Fund and Asset Management.
But what does it mean to be financially literate?
“It has different layers. It could be that you cannot 'read' at all,” said Ms Beerhalter, who led the Global Women in Leadership Economic Forum session 'Financial literacy – Taking Control of Your Own Wealth' with Ms Sahni.
Generally though, being financially literate means that you understand jargon, like yields, the panellists said, something many people can get intimidated by.
“Financial literacy is also to do with numbers. You are not literate when you can read perfectly or when you can do mathematics. You are only literate when you decide what’s happening with your wealth,” said Ms Beerhalter.
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To know how much you are worth, make a distinction between your assets, your investments, your spending and your debt, she advised.
“These are the four columns you need to have. Then you know what you really have,” said Ms Beerhalter. “There are a lot of rich people out there. I consult for a lot of families where the debt is higher than the investment. And they have a lot of money.”
Once you know how much you have, the next step is to decide where to invest it.
But be very careful with whose advice you take, the two panellists warned. You should not only be wary of family, but also financial advisers. Double check everything – and know your own faults.
“I call it the AIG – so arrogance, ignorance and greed – these are the things that bring you down,” said Ms Beerhalter. “If you have this kind of flaw, you need to know that because everyone selling you a product is trained to find out if you are arrogant or ignorant - they get it. And you will buy things you don’t want. So you need to look in the mirror and find out who you are.”
The tragedy of Ms Ahmad's story was that she had saved hard for five years to amass the Dh1m sum that she invested with her brother's advice. She accrued the savings while working at her previous banking job, for which she earned Dh25,000 a month.
“I'd saved very hard and thought I would buy a new house,” said Ms Ahmad. “I went to my brother’s house and he was playing in the stock market and really making good money. He bought stocks that cost him Dh.50 and became Dh1, so he had Dh5million and he doubled it to Dh10million. I told him OK, then I will try,” she added.
Ms Beernalter's advice for those new to investing is to only invest along with other people who put their own money in and to never invest with people who invest other people’s money.
“If you want to learn to invest, this is where you start. There are no exceptions to the rule,” said Ms Beerhalter.
She suggests novice investors start by looking for something that is interesting to them. With many asset classes out there, and options to invest in everything from camels to technology, investing in something you enjoy reading up on is important.
“So where is your interest? Is there something you are good at? Maybe you are a mathematic genius. In that case, I would advise you to look at cryptocurrency,” she said.
The most well known cryptocurrency is bitcoin. This month, the crypotcurrency hit a new high of $7,500 on the Luxembourg-based Bitstamp exchange, after a more than tenfold increase in value over the past 12 months. But there are many detractors, including the chief executive of JP Morgan, who called it a “fraud” in September.
Ms Beerhalter’s office does not invest in public stocks, preferring to opt for private equity. “We do not do public stocks at all, because for me it is a casino. We do private equity. And for that you build up a network of family-owned businesses, where you give them either a convertible loan or you become a shareholder,” said Ms Beerhalter.
Not everyone agreed with her thoughts though. Audience member Dinese Hannewald, the founder and chief executive of Grace Impact gUG, a not-for-profit enterprise platform that seeks to catalyse the social impact investing sector, said it is possible to invest in the stock market and be successful.
“I was an equity analyst at Goldman Sachs. You can buy blue chip stocks. You can buy tech stocks. You can learn about the stock market,” said Ms Hannewald, 57, who was born in the United States but now lives in Germany. "It’s actually easier to assess those things.”
Whatever your chosen investment vehicle it is important to do your research. If it is tech, read magazines and attend conferences said Ms Sahni.
Another option is to stick to what you know, she suggested. One of her friends, she said, invests in companies that produce products that she uses every day.
“Because if I am buying it there is a good chance other people are buying it. So she invests in companies that make products and services that she understands,” said Ms Sahni.
“And Warren Buffet, one of the most prolific investors in the US, has the same mentality. He doesn’t invest in slick tech companies, such as SnapChat. I think if you stick to the basics and invest in companies you know and like. You understand their business model and there is so much public information about them. They all publish their annual reports.”
That is how audience member Laila Kuznezov built her portfolio. She opened an e-trade account on the advice of her then-boyfriend, now husband, and only invested in companies she understood.
“By the time I got more comfortable, I created more of a portfolio. And I learned. I watched my stocks go up and I watched them go down and I saw which ones I wanted to be involved in and which ones I didn’t,” said Ms Kuznezov, 42, who is from the United States and has lived in the UAE since 2011.
“I would say don’t always invest in what you like because I invested in Coach and it went way down. But it was a learning experience for me. I learned little by little,” she added.
However, once you decide what to invest your money in, Ms Beerhalter and Ms Sahni advise taking things slowly.
“Take your time. Start investing time build up your network and be very careful when you invest,” said Ms Beerhalter.
“Always start small with investments, never start big – regardless of how rich you are. Start small because you might lose money, but then you will lose small.”