Dubai: Amid the high volatility in equity markets in the UAE, small investors, who care about their capital protection, have plenty of options.
The best option for a savings plan is a bank deposit, which gives 1-2 per cent interest rate.
In case of a slightly larger time horizon of about a year, there is another category of savings scheme that banks offer with a million dirham prize.
“These include Ghina Savings Account, Al Awwal Savings Certificates, National Bonds and of course the pioneer Mashreq Millionaire. These schemes offer 100 per cent capital guarantee and a chance to win up to Dh2 million dirhams in the grand draw,” Preeti Bhambri, managing director at moneycamel.com, personal finance and property portal, told Gulf News.
Schemes such as Mashreq Millionaire and Al Awwal Certificates are as secured as fixed deposit, but they are offered without any assured interest. Schemes such as Millionaire Destiny Savings Account and Ghina Savings Account offer a nominal rate of interest along with a chance to win a million dirhams.
“But if the account balance goes below the minimum required balance then the customer’s entry gets withdrawn from the millionaire draw. On the positive side such accounts offer a greater flexibility to withdraw money without any penal charges,” Bhambri said.
Regular investment plans
In case an investor wants better returns than a fixed deposit in a bank, and in a position to take a little more risk, the medium and long term investor can go for a regular savings plan with a bank or an insurance company.
“The savings plans allow customers to invest a small amount periodically. A customer can choose the funds where his investment will be made. Typically a customer can handpick anywhere between 10-300 international mutual funds to invest in. The minimum amount for monthly investment is $200-$300 for a minium of 5 years. Savings plan cover risk with the ‘built-in death benefit’, which pays 101% of the bid value of the plan in case of an investor’s death,” Bhambri said.
These products are mostly marketed as savings to buy a home, pay for children’s college or marriage etc.
“The Risk-Regular Investment Plans carry general market risk. However the risk-return choice is yours. All funds are risk graded to help customers. These range from funds offering conservative return similar to money market rates to low-risk funds offering security and potential growth and more. You can make a suitable choice according to your risk appetite, when it comes to selecting the funds that you invest in,” she said.
Long term options
In case of a longer-term investment, property investment and investment linked insurance plans are the most common instruments in the UAE.
“The property prices in the market have fallen in the last year bringing it to more affordable levels. The rising rentals also support the case for buying property. Most people are buying in the UAE with the expectation of capital gains due to Expo 2020. To add to these factors, mortgage rates are at an all-time low, bringing the cost of purchasing, further down,” she said.
Banks such as Abu Dhabi Islamic Bank and First Gulf Bank offer mortgages at just 2.99 per cet per annum for 2 years and at a floating rate thereafter.
