Wealth has always been a means of social improvement, providing access to education, material comfort, professional opportunities and a better life.
It is safe to say that wealth is one of the good things in life.
But what are the hidden truths behind investing and what should you do before making the decision to invest?
Investment truths -
1. It’s easier to lose money than to make it
2. More domestic break-ups and rows are caused by money, or rather
the lack of it (or the spending habits of one partner), than anything else. It seems that money is more important to many people.
3. You’ll be a better investor if you’ve secured your home base -
getting a roof over your head whose costs are sustainable is the vital first move. Buying, if you can, is usually better than renting, so a mortgage is the number one investment (this could equally be an investment property also given the constraints and risks of buying in a market like Dubai).
4. Paper profits have no more value than the piece of paper they’re
written on. What your investments are worth on a statement is just a row of figures. Until you turn that investment into cash by selling, it won’t put a roof over your head, put food on your table or provide an income if something happens to the breadwinner (see your financial adviser if you have noting in place to protect your income and debts).
5. Borrowing money to buy investments can be a very fast route to the
bankruptcy court, as can gambling on stock markets.
Before you invest, you will need to consider all of the above truths and take a closer look at yourself and those around you. You should be aware that no easy routes exist in finance. But more importantly, that everything revolves around you and your family and not the commission needs of assorted advisers and hucksters who claim to have the solution to your problems!
Before you start investing, take a cool look at your personal wealth. Draw up a balance sheet so you can check how much comes in each month from work, interest payments, dividends or pensions. Then look at where the money goes.
The knowledge this exercise brings will help you focus on your goal of increasing your wealth.
Investing almost always involves taking chances and serious investing, as opposed to taking a wild punt on a stock market move, ties up your money for a good length of time. Assuming that you have some spare money, think about how investing it rather than spending it will affect your household.
What you do with your money should have a goal as investments are generally intended for future consumption. Almost everyone can save some money without sacrificing too much lifestyle. Even small amounts each day can soon mount up and this is especially true for expatriates here in the Emirates. None of us pay any income tax so all of us should be making the most of this time in our lives by saving as much as possible.
However, before investing for the longer-term, you need to set up your own personal emergency (or rainy/sunny-day) fund for contingencies that you can imagine but couldn’t pay for out of your purse or wallet. The fund should contain enough money to pay for events such as a sudden trip abroad if you have close family in distant lands, any domestic problem that wouldn’t be covered by insurance, a major repair to a car over and above an insurance settlement (especially if you are commuting to or from Abu
Dhabi!) or a doctor or vet’s bill not covered by insurance.
An emergency cash reserve will serve as reassurance so you can ride out any investment bad times more easily!
The writer is senior financial consultant at Acuma-Independent Wealth Advice, Dubai. Opinion expressed here is his own and do not necessarily reflect that of Gulf News.
