How to Invest Small Amounts of Money Wisely in the UAE?

Salaries vary widely in the UAE. From AED 5000 per month, it may go up to a few lacs per month. However, on average, a UAE resident earns only AED 16, 775 per month. This clearly means most people don’t have much money to save or to invest in UAE. 

However, if you are determined to boost your income, there’s no reason to end in despair. As per financial advisors, no matter how big or small savings you make each month, you can always see your money grow. The key is not to pile up your savings. Just invest it!

Here, we’re sharing a few tips on what you can do with your small amount of unspent income in the UAE: 

Go for Gold 

When you have decided to invest in UAE, the first thing that clicks your mind is gold. ‘Gold’ is considered as one of the greatest stores of wealth that can be used as a hedge against inflation. Experts say, in order to avoid getting their savings eaten away by inflation, individuals should set at least 5% of it for gold. Not just during the times of inflation, gold is a safe haven even when equities fail to perform. 

Think About Investing in Stocks 

Stocks are often considered as a great investment option but, only for the affluent class. However, it’s a misconception. Stocks are quite affordable. In fact, you can buy shares from some of your favourite companies for less than AED 100. 

So, if you’re thinking to invest in UAE, think about stocks. A stock market is a place where you have the chance to multiply your wealth. Though the value of stocks rises and falls daily, in the long run, their value increases. To have a diversified portfolio, it is advisable to buy a minimum of 5 to 6 stocks. However, it should be noted that buying shares from a full-service professional is not recommended; it is better to buy them directly from the company. 

Give a Chance to ETFs 

An ETF or exchange-traded fund is an investment fund that trades on stock exchanges, just as the stocks. It uses pooled money to hold assets such as commodities, stocks or bonds and offers a good return. Just as stocks, ETFs can also be purchased at low cost through a broker. Since diversification is the key to a good investment, no matter how small or big is your savings, it is always a good idea to park a portion of your savings for ETFs. 

And, Why not Mutual Funds 

Needless to mention, but mutual funds are one of the most popular investment options amongst the investors. They allow you to to buy a part of the pooled investments in order to diversify your portfolio through the ownership of individual stocks or bonds.

Another advantage of choosing mutual funds is that they are managed by professional fund managers who have expertise and experience selecting the best securities, or stocks and bonds. Their expertise could get you the best risk-adjusted returns. 

In Closing 

So, you have incurred all knowledge about investing your savings in the best possible ways. However, there are certain investment options that you should avoid considering when you don’t have any investment know-how. 

For instance, it’s a bad idea to risk your hard-earned money in bonds. Although they are associated with low risk and consistent income, they are also linked with changing interest rates. This phenomenon is of particular concern when current interest rates are low. This is because the market price of bonds is likely to move in the opposite direction of prevailing rates. Another investment option that should be ruled out is ‘forex and futures’. Forex and futures trading is highly complicated and is often associated with high risk and high reward investments. Therefore, if you don’t have much knowledge about investing in UAE, it’s better to strike off this option.