Many of us have a lump sum of cash savings that we don’t know what to do with. Generally it’s a number big enough for you not to ignore, but not big enough to be taken seriously by any private banker.
So you’re left alone trying to make your money work for you. Let’s say you have Dh100,000 stashed away. This money can accumulate in your salary account over time but couple a minimal return with rising prices in the UAE and that savings pot will be worth less every year.
The value of your cash is actually decreasing at the level of inflation (around 2.5 per cent in the UAE today). That means you can buy 2.5 per cent less this year with exactly the same amount of cash than you could last year.
So what are your options? It all depends on the level of appetite you have for risk. How much risk are you prepared to take with your money and how quickly do you need access to your cash? The higher the risk, the higher the return.
If this Dh100,000 is your only cash reserve, you should aim for safe and “liquid” options you can release immediately without losing much value. If you have other liquid reserves you can separately tap into, you can now consider some longer-term, less liquid and riskier options.
Safe savings option
For the safe option – low returns, but peace of mind – the best place to put your money is in a savings or deposit account. Low risk will bring low returns; the savings and deposit accounts listed for the UAE on Souqalmal.com show interest rates varying from 0 per cent to around 1.5 per cent.
Higher rates such as 5 per cent can be obtained - but these are usually “step-up” accounts, where the 5 per cent applies only on the last month of the period of the fixed deposit.
The advantage of a savings account is that you can access your money at any time in an emergency. You can also do so with a fixed deposit – but this would mean sacrificing the rates originally applied.
Government/ corporate bonds
One level of risk higher is to buy bonds. You can either go with government bonds or corporate bonds.
The risk, and therefore the return, depends on the creditworthiness of the party you’re lending to – that is, either the country or the company issuing the debt.
When buying bonds, you also have to look at the purchase price (are you buying at the market value, above or below it?) and the frequency of the “coupon” payment. The average return on a bond is between 4 and 6 per cent.
Two other risk factors to consider are, firstly, currency fluctuations if buying in any currency other than the US dollar, which the dirham is pegged to. If you are buying euro bonds, there is an additional risk – or upside – in currency variations. Secondly, there are trading costs involved in buying and selling bonds, and the cost of each transaction depends on the channel you are using.
The stock market
If you can handle short-term volatility, buying stocks may be for you. You’ll need to stay on top of economic news, stock market trends and analysis.
You can trade on the Dubai Stock Exchange or an international stock exchange, depending on where you are most comfortable. And you can trade through a stockbroker, who may give you advice and analysis, or do your own trading through online platforms. Returns on stocks vary significantly depending on the economic environment and the risks you have taken.
The Dubai Financial Market has increased 49 per cent to date in 2014, but it still goes through ups and downs – like any market.
Worldwide, markets are up this year thanks to the global economic recovery. If you do not want to choose individual stocks, you can invest into mutual funds where you will be investing in a diversified basket of stocks. Remember, there are trading costs and currency risks involved.
Early seed investment in a start-up
If you are an entrepreneur at heart but never managed to start your own business, you can become an angel investor and provide advice to the founder. This is one of the ways you can get involved without quitting your job and taking the full risk.
However, this is a very risky place to put your money so make sure you do your due diligence on the company and the founder. Angel investments can be of virtually any amount, depending on the venture’s needs.
Ambareen Musa is the founder and chief executive of Souqalmal.com
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
RESULT
Copa del Rey, semi-final second leg
Real Madrid 0
Barcelona 3 (Suarez (50', 73' pen), Varane (69' OG)
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
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Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Killing of Qassem Suleimani
'Young girls thinking of big ideas'
Words come easy for aspiring writer Afra Al Muhairb. The business side of books, on the other hand, is entirely foreign to the 16-year-old Emirati. So, she followed her father’s advice and enroled in the Abu Dhabi Education Council’s summer entrepreneurship course at Abu Dhabi University hoping to pick up a few new skills.
“Most of us have this dream of opening a business,” said Afra, referring to her peers are “young girls thinking of big ideas.”
In the three-week class, pupils are challenged to come up with a business and develop an operational and marketing plan to support their idea. But, the learning goes far beyond sales and branding, said teacher Sonia Elhaj.
“It’s not only about starting up a business, it’s all the meta skills that goes with it -- building self confidence, communication,” said Ms Elhaj. “It’s a way to coach them and to harness ideas and to allow them to be creative. They are really hungry to do this and be heard. They are so happy to be actually doing something, to be engaged in creating something new, not only sitting and listening and getting new information and new knowledge. Now they are applying that knowledge.”
Afra’s team decided to focus their business idea on a restaurant modelled after the Leaning Tower of Pisa. Each level would have a different international cuisine and all the meat would be halal. The pupils thought of this after discussing a common problem they face when travelling abroad.
“Sometimes we find the struggle of finding halal food, so we just eat fish and cheese, so it’s hard for us to spend 20 days with fish and cheese,” said Afra. “So we made this tower so every person who comes – from Africa, from America – they will find the right food to eat.”
rpennington@thenational.ae
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Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old
Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai
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'Worse than a prison sentence'
Marie Byrne, a counsellor who volunteers at the UAE government's mental health crisis helpline, said the ordeal the crew had been through would take time to overcome.
“It was worse than a prison sentence, where at least someone can deal with a set amount of time incarcerated," she said.
“They were living in perpetual mystery as to how their futures would pan out, and what that would be.
“Because of coronavirus, the world is very different now to the one they left, that will also have an impact.
“It will not fully register until they are on dry land. Some have not seen their young children grow up while others will have to rebuild relationships.
“It will be a challenge mentally, and to find other work to support their families as they have been out of circulation for so long. Hopefully they will get the care they need when they get home.”
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MISSION: IMPOSSIBLE – FINAL RECKONING
Director: Christopher McQuarrie
Starring: Tom Cruise, Hayley Atwell, Simon Pegg
Rating: 4/5
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Engine: 8.0-litre, quad-turbo 16-cylinder
Transmission: 7-speed auto
0-100kmh 2.3 seconds
0-200kmh 5.5 seconds
0-300kmh 11.6 seconds
Power: 1500hp
Torque: 1600Nm
Price: Dh13,400,000
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The years Ramadan fell in May
