Dubai: Deciding which specific investment vehicles to go for — and which ones to avoid — is another critical aspect in managing instant wealth.
Steve Gregory, director of technical services of Holborn Assets, recommends mutual funds that buy stocks in companies listed on the global exchanges. "Providing there's a five-year timeframe at least, a range of mutual funds from leading international fund managers will grow the money much more quickly than cash deposits," Gregory advises. However, he says it may not be wise to buy bonds at the moment.
"I think it is presently wrong to start buying bonds. Even the UK is presently in danger of losing its AAA credit status, which means it might have a possibility of defaulting on bonds. Just about every other type of bond in the world is of poorer quality than UK bonds," Gregory says.
"If I'm right about inflation, then interest rates will move up as governments fight to contain inflation. When interest rates move up, the value of bonds will fall. No one wants a bond which guarantees a profit which is smaller than interest rates from the banks," he adds.
Deciding which countries or regions to invest your fortune in is also critical. Considering the current economic situation, it may be beneficial to look east, or to countries where the gross domestic product is increasing at more than 5 per cent per year.
This means that investing in a range of regional funds, like the Asean, South American, Eastern European, Pacific region and Middle Eastern, among others, is likely to see returns in excess of 20 per cent per year, though there will be some moments of volatility.
"If you buy stocks in companies in the UK, they are bought with sterling," Gregory points out.
"Companies in Germany are bought with euros. Companies in the US are bought with US dollars. If you want profits, I suggest you avoid all three currencies at the moment, in addition to yen.
"These countries have the biggest exposure to bank bailouts, corporate failures, high unemployment and high social services expenditure. They are not a good bet for corporate profits or currency improvements."
Since it is also necessary to set aside some funds for short-term needs and emergency, Gregory suggests opening an offshore bank account in a safe jurisdiction with government investor protection.
An example is the Isle of Man, which guarantees deposits in the event of bank failure. Other examples include the Allied Irish Bank, which offers multi-currency accounts, and Standard Bank, which has a representative office in Dubai.
Other major international banks also offer such accounts. You will need to decide on a currency for the deposit and should avoid speculating with currencies.
"A US dollar account would therefore be appropriate for short-term needs and emergency funds," Gregory adds.
