World is your oyster, break out of that shell

Expanding your investment horizons could pay off in the long-run. You just need to think outside the box, says Nima Abu Wardeh.

Gary Clement for The National
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We're all global citizens here.
We're not afraid to explore, try new things and look upon the world as our backyard.
Or are we?
When is the last time you shopped around to see what interest is being paid out on savings or deposit accounts? Have you really looked at where your money could be working harder for you?
Didn't think so.
And if you did, I bet you'd look at what's being paid locally or back in your home country.
How would you react if you were to know that in Argentina you can get 29.59 per cent APY in return for depositing money for one year.
And there's India. Narendra Modi, sworn in this week as prime minister, has translated into optimism in what India will do and become. Interest rates there go up to 9.42 per cent on one-year deposits.
Contrast this with corresponding rates in the UAE of 1.3 per cent.
Of course there are sound, solid reasons for not jumping up and down for joy and yanking our hard-earned cash out of wherever and moving it. We need to look at what the economies of these countries are doing, how volatile the local currency is, and whether you can get your money out easily, as well as many more issues, not the least of which is inflation. These high rates are for local currency deposits, after all, and the host countries usually have internal challenges to deal with - as you can tell from a glance at this website that details top deposit interest rates around the world:
At a first glance it reads like a who's who of turmoil, civil war and corruption. But that's a very sweeping "disabling" statement. Look again. Closely. Then go and do your own due diligence.
Think through where you are headed with your life.
A couple I know have decided they will move to Argentina when they retire - within a few years. Of course if inflation remains high, and is, say, 20 per cent when they move there, then the real "take-home" interest on their deposits will not be anywhere close to 29+ per cent. This is a contentious issue in Argentina - last year inflation was officially 10.9 per cent - the private sector put it at 25 per cent and the debate rages on.
Another person I know has found himself a lovely home in Kerala, in the south-west of India, creating his own Marigold Hotel experience (check out the movie if you haven't seen it) simply because he cannot afford to go back to his native UK to retire. He was told that his time at his place of employment is up and was given a few months to sort out his affairs. Oh, if only he'd deposited money in India sooner.
These people have deliberately decided where they want to live. Looking at what the local currency can be doing for them should be part of their plan.
The point about this is that we would do well to broaden our horizons.
But that's not all. It's also about looking at what our money could be doing for us. Interest rates are key. A seemingly "small" difference could bring forward your retirement by years.
Last week I wrote about that magical tipping point where passive income (income from investments or interest rates) exceeds active income (income that you work for). Each per cent our money earns has an accumulative effect and means that you can get to this magical point more quickly, the more interest is paid out on your savings and investments.
Let us assume, as we did last week, that the starting balance is zero, and that a couple who jointly earn Dh40,000 will put away half of their take-home pay because there's a lot more they want to do with their life than work full time.
Let's see what 3, 5 and 7 per cent compounded annually does for them over 10 years. In a nutshell the difference between earnings on the 3 vs the 7 per cent is more than $600,000. Here's the numbers:
At 3 per cent their accumulated interest comes to Dh395,838, which turns their savings into Dh2,795,838.
If we go up to 5 per cent this is what happens: their total interest jumps by not quite double, but goes up by over Dh300,000 Dh699,841.
This takes their balance to Dh3,099,841.
And if this fortunate couple could have 7 per cent interest on their money then this is their pot at the end of a decade of work: Dh3,440,377.
Their interest nearly triples from what they would get at 3 per cent to Dh1,040,377.
How hard is your money working for you?
It seems that we are not so global when it comes to looking at what our money could be doing for us.
The quest to get money working for me made me look beyond where I live.
Here's what I found out: we should be brave and look outside of our boxes. Make sure you understand the downside, and think your life through. What many will shy away from might be just the ticket.
Nima Abu Wardeh is the founder of the personal finance website You can contact her at
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