There are two ways of investing in the stock market — paying in lump sums when you have a bit of money to spare, or investing a regular amount every month for years or decades.
While the lump sum gives you an instant hit but is potentially riskier, regular investing is more of a slow burn — offering a potentially smoother return.
Which works for you will depend on personal factors, such as how much money you have at your disposal, and your attitude to risk.
If you are lucky enough to have a lump sum at your disposal, the sooner you put money into the stock market, the longer it has to grow.
Say you have $100,000 (Dh367,300) and invest it all in shares today, if stock markets rise by an average 7 per cent a year, your money will have grown to a whopping $1,497,446 after 40 years.
The best time to invest is as soon as you get paid, before you spend your salary on something else.
However, if you invest $2,500 a year over 40 years, you have still invested $100,000 in total but will end up with a much smaller sum of $534,024, assuming the same growth.
Therefore, the simple answer is, yes, lump sum investing is better than regular monthly investing, but with two drawbacks. First, not everybody has such a juicy sum to hand; the second is that investing it all in one go can backfire if markets crash the next day, and your lump sum is suddenly worth a lot less.
Moukarram Atassi, head of investment management at National Bank of Fujairah, favours lump sum investing. "To take maximum advantage of compounding stock market growth, it pays to deploy your money sooner rather than later," he says. If you have the capital and can stomach volatility, this should give you greater long-term gains.”
He also understands that it makes some investors nervous. “Clients often ask what happens if they invest a lump sum, and the market makes a downturn soon afterwards. If this is a worry, lump sum investing is probably not for you," he adds.
Regular contributions can reduce risk by smoothing out the market peaks and troughs. “This is a more defensive strategy, especially during market volatility or steep corrections," says Mr Atassi.
However, there is another way of reducing the risks when investing a lump sum, he adds: "You could put the money into a multi-asset portfolio of global equities, bonds, property funds, gold and alternative investments, which gives you diversification if share prices slump.”
Ultimately, the decision is personal. “It depends on your financial circumstances, goals and more importantly, whether you can sustain a sharp drop in the value of your investment, in a market correction,” he says.
Investing a lump sum has an element of a gamble about it, as your success partly depends on chance, says Yves Bonzon, chief investment officer at private bank Julius Baer. "You could invest at exactly the right time, and the market starts to rise the next day. Or you might be unlucky and it collapses instead.”
He says professional investors prefer not to rely on luck: “It's a much better approach to build your portfolio over a period of time.”
So if you have a lump sum, Mr Bonzon recommends drip feeding the money in over a period of, say, six months, to reduce risks.
Ben Barber, UAE financial blogger at www.buildingwealthwisely.com, says your decision may also rest on where the money is coming from. "Say you invested $100,000 you had inherited from your parents or grandparents, only for the market to fall by half. You'd probably feel dreadful, as you felt a responsibility to steward that money."
In that case, spreading your investment over a number of months is a happy compromise. “It balances human nature against investment logic,” he says.
Windfalls are rare, so in practice most people can only afford to invest from their regular income.
The problem is that regular investing is a bit like regular exercise, we know we should do it but find it all too easy to put off, Mr Barber says.
“The best time to invest is as soon as you get paid, before you spend your salary on something else," he adds. "You quickly learn to live on what is left, and before long, won’t even miss it. You may even come to enjoy the process, knowing you are building long-term wealth for your future.”
For expatriates earning in one currency but investing in another, investing regularly has the added advantage of smoothing out foreign exchange fluctuations, Mr Barber adds.
Beware of charges though, as you can sometimes pay more for regular monthly investments, even on a low-cost online platform, than for lump-sums.
Mr Barber picks out one more benefit of regular savings: if you can automate the process, you can largely forget about it and don't have to worry about stock market volatility. “It is one of the few ways of mastering your emotions and the markets," he adds.
Mark Chahwan, co-founder and chief executive of UAE-based robo-adviser Sarwa, says by investing regularly, you also benefit from something called "dollar-cost averaging", which works to reduce stock market volatility.
If you invest every month, in regular chunks, you average out the amount you pay for a stock or fund. Say you buy three shares in a company trading at $110 per share for $330. Next month, the share price has fallen to $100, and your three shares cost just $300. Next month, the share price has dipped again to $90, and you pay $270.
Mr Chahwan says this means you bought nine shares for $900. “If you had invested $900 in month one, you would only have eight shares because the price was higher," he adds. "Dollar-cost averaging got you a better deal.”
This can work against you when a share price is steadily rising, but averaging out your payments spares you the agony of attempting to time the market, Mr Chahwan says. "Trying to buy stocks at the right time is a stressful exercise that rarely pays off, and usually leads to underperformance.”
Dollar-cost averaging also means you can actually benefit from stock market volatility. That's because if markets fall, your monthly contribution picks up more stock.
A stock market dip can also be a good time to pay in a lump sum, because again, your payment picks up more of a particular share. It isn't easy to do, though; you have to be disciplined to invest when share prices are falling and investors are panicking.
Christopher Davies, chartered financial planner at The Fry Group, Middle East, says investing a lump sum exposes your capital to the market for a longer period, but the prospect of a higher return comes with a higher risk.
So you need to work out your attitude to risk and talk to your adviser if you have one. "Then you can allow for short-term volatility within a long-term investment strategy.”
Mr Atassi says both lump sum and regular investing beat the other alternative of "doing nothing.”
The best option of all is doing both. You can never invest too much, or too often.
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Director: Joseph Kosinski
Rating: 4/5
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Name: Steppi
Founders: Joe Franklin and Milos Savic
Launched: February 2020
Size: 10,000 users by the end of July and a goal of 200,000 users by the end of the year
Employees: Five
Based: Jumeirah Lakes Towers, Dubai
Financing stage: Two seed rounds – the first sourced from angel investors and the founders' personal savings
Second round raised Dh720,000 from silent investors in June this year
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
STAGE%201%20RESULTS
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Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
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Juventus 2 (Bonucci 36, Ronaldo 90 6)
Genoa 1 (Kouame 40)
Veere di Wedding
Dir: Shashanka Ghosh
Starring: Kareena Kapoo-Khan, Sonam Kapoor, Swara Bhaskar and Shikha Talsania
Verdict: 4 Stars
Key facilities
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- Premier League-standard football pitch
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- 600-seat auditorium
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1. Sebastian Vettel, Ferrari 1:39:46.713
2. Kimi Raikkonen, Ferrari 00:00.908
3. Valtteri Bottas, Mercedes-GP 00:12.462
4. Lewis Hamilton, Mercedes-GP 00:12.885
5. Max Verstappen, Red Bull Racing 00:13.276
6. Fernando Alonso, McLaren 01:11.223
7. Carlos Sainz Jr, Toro Rosso 1 lap
8. Sergio Perez, Force India 1 lap
9. Esteban Ocon, Force India 1 lap
10. Stoffel Vandoorne, McLaren 1 lap
11. Daniil Kvyat, Toro Rosso 1 lap
12. Jolyon Palmer, Renault 1 lap
13. Kevin Magnussen, Haas 1 lap
14. Lance Stroll, Williams 1 lap
15. Pascal Wehrlein, Sauber 2 laps
16. Marcus Ericsson, Sauber 2 laps
17r. Nico Huelkenberg, Renault 3 laps
r. Paul Di Resta, Williams 10 laps
r. Romain Grosjean, Haas 50 laps
r. Daniel Ricciardo, Red Bull Racing 70 laps
Race 3
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Mubalada World Tennis Championship 2018 schedule
Thursday December 27
Men's quarter-finals
Kevin Anderson v Hyeon Chung 4pm
Dominic Thiem v Karen Khachanov 6pm
Women's exhibition
Serena Williams v Venus Williams 8pm
Friday December 28
5th place play-off 3pm
Men's semi-finals
Rafael Nadal v Anderson/Chung 5pm
Novak Djokovic v Thiem/Khachanov 7pm
Saturday December 29
3rd place play-off 5pm
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The 12
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
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Spain
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Dir: Jesse Peretz
Starring: Chris O'Dowd, Rose Byrne, Ethan Hawke
Two stars
Story%20behind%20the%20UAE%20flag
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Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
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Pakhtoons Owners: Habib Khan and Tajuddin Khan; Key player: Shahid Afridi
Maratha Arabians Owners: Sohail Khan, Ali Tumbi, Parvez Khan; Key player: Virender Sehwag
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Kerala Kings Owners: Hussain Adam Ali and Shafi Ul Mulk; Key player: Eoin Morgan
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Format 10 overs per side, matches last for 90 minutes
Timeline October 25: Around 120 players to be entered into a draft, to be held in Dubai; December 21: Matches start; December 24: Finals
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"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
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Chef Nobu's advice for eating sushi
“One mistake people always make is adding extra wasabi. There is no need for this, because it should already be there between the rice and the fish.
“When eating nigiri, you must dip the fish – not the rice – in soy sauce, otherwise the rice will collapse. Also, don’t use too much soy sauce or it will make you thirsty. For sushi rolls, dip a little of the rice-covered roll lightly in soy sauce and eat in one bite.
“Chopsticks are acceptable, but really, I recommend using your fingers for sushi. Do use chopsticks for sashimi, though.
“The ginger should be eaten separately as a palette cleanser and used to clear the mouth when switching between different pieces of fish.”
Poland Statement
All people fleeing from Ukraine before the armed conflict are allowed to enter Poland. Our country shelters every person whose life is in danger - regardless of their nationality.
The dominant group of refugees in Poland are citizens of Ukraine, but among the people checked by the Border Guard are also citizens of the USA, Nigeria, India, Georgia and other countries.
All persons admitted to Poland are verified by the Border Guard. In relation to those who are in doubt, e.g. do not have documents, Border Guard officers apply appropriate checking procedures.
No person who has received refuge in Poland will be sent back to a country torn by war.
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law