Investing is without a doubt (if done properly) one of the most rewarding decisions that you can make with your money.
The UAE presents itself as an extremely attractive place to invest. Not only has it achieved phenomenal growth but its investors have been able to reap quite lucrative returns over the years.
But before venturing on your investment journey, you should bear in mind that investments do carry their fair share of risk. Hence, it is critical to consider the following factors before investing in UAE.
First off, you should be aware of the biggest pitfall that new investors face: committing all their savings for investments to reap the maximum possible return.
This leaves them in a precarious position because in the event on an emergency or unforeseen need, their money will be stuck. They will either have to sell off their investment(s) on unfavourable rates or may have to scramble around to arrange fundings from somewhere else. Both of these are situations that should be avoided at all cost when it comes to investments. Therefore, it is extremely important to have a safety net in place.
This safety net is called an emergency fund and it should be able to cover at least 3 months’ expenses.
Once you have ensure that your safety net is in place, you should determine your disposable income. This is actually the money that you can ‘afford’ to invest on a recurring basis.
Your disposable income is the money that you have at your ‘disposal’ once the basic needs are met.
Once you have determined your disposable income, you can then make a reasonable decision regarding the amount of money that you each dedicate towards investment and how much do you want to keep for your emergency fund or some other need.
This is an important point to consider before committing money for investment. You should have a fair idea of your anticipated liquidity needs. For example, you may plan to take out money to fund your children’s college education after ten years or you may be planning to buy a bigger house after five years.
In either case, if you have taken your liquidity needs in account. You will be able to appropriately funds towards investments and to adequately match the profile of your investments in terms of your liquidity needs.
It is crucial to understand the distinction between willingness to take risk and ability to take risk and to keep these factors aligned.
It is true that high risk my lead to higher returns, but it can just as easily may result in a higher loss.
Always invest in line with your appetite for risk and tolerance for loss.
You should never allow yourself to become a victim of the herd mentality or be swayed by sales pitches. Don’t follow advice blindly and always do your own research before making any investment decision.
It is true that you can make the most of your money by proper investments but it should never be a knee-jerk decision. You should put in sufficient time to understand your unique investment needs, to properly plan, and to formulate a winning strategy in order to be successful in the investment journey.
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