For first-time investors, choosing an investment can be complicated. Friends Provident International (FPI), a provider of unit-linked savings and life insurance products, recently released the seventh edition of its Investor Attitudes Report, which looks at the decision-making patterns of investors. So, to help you to make more informed decisions, Ian Bentley, the Middle East and Africa sales director at FPI, says there are key issues a potential investor should consider before parting with their hard-earned cash.
1. The value of financial advice
I cannot stress enough the importance of seeking appropriate financial advice before putting your money to work. When you invest, you want to be confident that the likely levels of investment return will meet your needs. Our report shows that the increasing negative sentiment towards shares and equities is in line with a significant decrease in the number of investors turning to stockbrokers for financial advice. In fact, very often people turn to friends or family for strategic financial advice. However, without professional advice you may be taking unnecessary and often misunderstood risks.
2. Diversification
Diversification allows you to spread the risk associated with investment across different asset categories and geographical regions. You should consider investing a percentage of your portfolio in lower-risk assets to avoid the dangers of having your whole investment in medium- or high-risk categories and spread your investments across different regions. It is also important to look at how asset classes may be correlated - or connected - because this can impact the investment performance of a portfolio. Any balanced portfolio should include cash, an investment in equities, fixed-income bonds and property.
3. Volatility
Put simply, an investment with high volatility has more risk associated with it. It is important to understand the relationship between volatility and risk. If you are willing to risk an investment in a volatile asset class, you may achieve high returns, but you must also accept that you could lose some - or in extreme cases - all of your investment.
4. Appetite for risk
Investors should choose assets that closely match their appetite for risk. We have seen UAE investors' appetite for risk reduce - no doubt due to the current investment climate - with more of them considering risk-averse strategies such as saving in cash. An investment that gives a high return, but carries a high tendency to fluctuate in value may only be suitable for those who can afford to lose some of their money or can accept a high degree of price volatility.
5. The dangers of inflation
Always consider the impact of inflation on any asset class. It may not have a drastic effect on stocks, but inflation plays a huge role in fixed-income investments. When you receive your investment return, you may find the value of your initial capital has been eroded due to inflation eating into the profits.
6. Reasons for investing
Think about why you are investing. Is it for your retirement, to buy a house, to pay for your children's education or maybe to secure financial independence? Thinking about what you want to achieve will help you to decide how much risk you are ready to take and how much you are willing to invest.
7. Time horizon
Our report shows that an increasing number of UAE investors are pursuing long-term investment strategies, with a time horizon of more than five years. Generally, medium- to long-term investments allow for a more aggressive investment approach because the volatility of returns is often evened out over time. If you invest to pay for your children's university fees, for example, you have an investment time horizon of 18 years from the time they are born.
8. Past performance
The research conducted for our report shows that the most frequent consideration for UAE investors when selecting investment funds is past performance. This should never be viewed as a reliable indicator of future performance. Even if you have monitored a stock's movements for years, future market changes are not predictable.
9. Geography
People often make the mistake of confusing the familiar with the safe. By this, I mean they do not always look beyond their home country when choosing where to invest. However, if you choose to invest in a single country equity and a regional shock occurs, such as the tsunami in Japan, there may be a slump that could negatively impact the investment performance of your portfolio - simply because you chose to invest disproportionately in that one country. There is, of course, correlation between the world's investment markets, but this can be mitigated to some extent by investing with a more global outlook.
10. The cost
Consider the costs associated with any investment. Advice from professionals may be paid for directly by you on a fee basis. Alternatively, the adviser may be remunerated by the provider of the investment in question. If you are investing in mutual funds, there are costs involved with buying and selling the assets in which the fund invests, charges associated with the valuation of the funds and charges associated with the product to which the funds are linked.
pf@thenational.ae
The specs
Engine: Direct injection 4-cylinder 1.4-litre
Power: 150hp
Torque: 250Nm
Price: From Dh139,000
On sale: Now
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The cost of Covid testing around the world
Egypt
Dh514 for citizens; Dh865 for tourists
Information can be found through VFS Global.
Jordan
Dh212
Centres include the Speciality Hospital, which now offers drive-through testing.
Cambodia
Dh478
Travel tests are managed by the Ministry of Health and National Institute of Public Health.
Zanzibar
AED 295
Zanzibar Public Health Emergency Operations Centre, located within the Lumumba Secondary School compound.
Abu Dhabi
Dh85
Abu Dhabi’s Seha has test centres throughout the UAE.
UK
From Dh400
Heathrow Airport now offers drive through and clinic-based testing, starting from Dh400 and up to Dh500 for the PCR test.
Company%20Profile
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The five pillars of Islam
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Thank You for Banking with Us
Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
Rating: 4/5
HER%20FIRST%20PALESTINIAN
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Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
LOVE%20AGAIN
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Specs%3A%202024%20McLaren%20Artura%20Spider
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Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
COMPANY%20PROFILE%20
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'Moonshot'
Director: Chris Winterbauer
Stars: Lana Condor and Cole Sprouse
Rating: 3/5
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
The%20specs%3A%20Macan%20Turbo
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3EDual%20synchronous%20electric%20motors%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E639hp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E1%2C130Nm%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20automatic%3Cbr%3E%3Cstrong%3ETouring%20range%3A%20%3C%2Fstrong%3E591km%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh412%2C500%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3EDeliveries%20start%20in%20October%3C%2Fp%3E%0A
ADCC AFC Women’s Champions League Group A fixtures
October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)