Here’s a secret from the investing world … you don’t need millions to get started! In fact, the opposite is true, you can and should begin your investing journey as soon as possible, even if you only have 100 dirhams to set aside each month. You’ll surprise yourself with how large your investment account may grow with consistent contributions over time.
First things first: Budget & Save
The first thing you need to do is be able to control your spending with a clear understanding of your expenses each month. Living below your means is the primary driver between becoming wealthy and going into debt over time. Many financial advisors and coaches will encourage you to “pay yourself first”. This means to set aside an amount for Savings and then commit to not overspending on credit cards to cover all your needs and wants. Once you’re able to do this consistently, then you’re in a good place to put those monthly savings to work for you.
Second step: Find a platform to invest
Aside from commodities (like gold) and real estate (your private home or rental property), the primary channel for people to invest is in the Stocks and Bond markets. To do this, you’ll need to open a brokerage account to fund with your savings and then make investment choices. If you want to take a hands-off approach, then I recommend exploring Sarwa, which is a robo-advising investment platform with low fees and good risk management. If you want to take the do-it-yourself approach then take some time to compare the services offered by various Brokers at BrokerChooser.com. You’ll want to make sure the fees are low and the investment options are broad.
Check: Today’s Gold Rate in Dubai
Third step: Build a diverse portfolio
Most people get overwhelmed at the variety of investment options available to them. I recommend keeping it simple. Select a few ETF’s which have very low fees (Vanguard and Blackrock have great options) that will help diversify your portfolio and reduce risk. An example portfolio construction might include 40% Stock in your home country, 20% Bonds in your home country, 20% International Stocks and 20% Commodities. This means that you might select 4 low-fee ETF’s that give you broad international diversification.
Fourth step: Invest consistently
Commit to funding your investment account on a regular basis each month with the same amount and purchasing additional stocks or bonds. This strategy is called Dollar Cost Averaging. If the market goes up (which is good) you’ll buy less units for the same amount. But if the market goes down, you’ll be able to afford buying more units of stocks or bonds for the same total amount. Investing consistently in up and down markets will help to smooth your average purchase price and give you the best chance at earning a decent return.
Do nothing! Investing should be as exciting as watching paint dry or the grass grow. You should not be making daily adjustments to your investment accounts once you have set a strategy in place. All you really need to do is Steps 1, 3 and 4 in mind, and then let the magic of compounding over time work in your favor.
Remember, you can take all of the above steps even if you only have a few hundred dirham to invest each month. The process is exactly the same regardless of your portfolio size. Getting started early and learning along the way is the best thing you can do to set yourself up for success in the longterm. Good luck and go for it!
Matthew Nobles is the Founder of Dubai Personal Finance, a mission-based social enterprise focused on improving the personal financial literacy of UAE residents. As a certified Financial Coach and Financial Advisor, Matthew guides groups and individuals to identify their values and develop portfolio investment strategies to achieve their financial goals. Matthew is a dynamic speaker, coach and educator who is passionate about empowering others to take control of their personal wealth journey.