Dubai: Financial planners are advising their clients to save long-term to get reasonable returns after trillions of dollars were lost due to massive volatility in financial markets,
“Current market conditions are generally not as rosy as earlier due to global economic slowdown and instability in oil prices. That said, there are still many savings and investment opportunities available according to the risk profile of an individual. For example, investors under the age of 30 can still consider long-term investments in equity and real estate,” Preeti Harrison Bhambri, Managing Director, moneycamel.com told Gulf News.
Stuart Ritchie, financial practitioner at AES International also agreed on taking a long-term view for investors. Given the current rate of inflation of around 2 per cent, banks are unlikely to offer real returns in the short-term.
“The interest rates on offer from the banks are unlikely to offer a ‘real’ return i.e. over and above inflation, therefore investing should be aimed at the long-term. I would still recommend holding 3 to 6 months of expenditure in an interest paying bank account, however, anything over and above this [excluding any planned expenditure] could be considered for investing,” Ritchie said.
The best way to address this market volatility would be to diversify in different strategies for example, financial advisers agreed.
“We advise our clients not to put all of their eggs in one basket but to pursue a diversified equity strategy. Discussing the trade-offs between risk and returns is critical, and mostly it is those who take a long-term view that are rewarded — sentiment-driven short-term decisions are often risky business,” Ritchie said.
“The first step for an investor is to determine the objective for savings. Is the idea to just save money and not spend it or is it capital growth or is it to earn a nominal rate of interest? Essentially equity based investments promise a higher return with a high risk as well. Debt based investments have low returns with [probable] capital guaranteed options. Investors should look for products that suit their risk appetite,” Bhambri from moneycamel said.
A recent survey that polled 3,000 Gulf-based residents, which include 2,400 individuals in the UAE, between December and January, found that more than three quarters of them are only able to put less than 20 per cent of their income towards their retirement. About a fifth said they’re able to save just 0 to 10 per cent.
The respondents who are struggling with retirement savings are not average-income residents or trying to make ends meet with a Dh1,000 to 3,000 monthly pay cheque. Most of them enjoy incomes of between Dh40,000 and Dh60,000 per month.
“Most people spend more time planning their holiday than their finances and is imperative to secure a trusted partner that can guide you accordingly. creating a financial plan which looks at suitability and affordability is key and should consider all factors in particular “what if” scenarios. Few plan or protect themselves effectively from loss of income, sickness or death — all of which I am sure you would agree will have an impact on the success of your financial standing. Protecting yourself, your business and your loved ones should feature high on your plan before you commit investment,” Tim Searle, Chairman, Globaleye, a financial advisory firm.
But Sam Instone from AES International has a word of caution.
“Never incept a plan where you are contracted to save money for a long period of time. It is far too easy in the UAE for a financial salesperson to persuade you to invest in a “flexible” savings plan for 15, 20 or 25 years. The charges associated with the education plans, wedding plans and retirement plans mean that you will rarely make any money,” said Instone, who calls himself “an enemy of traditional financial services”.
He would advise investors to seek advice from an independent, fee based adviser so “you don’t get sold a product where the commission erodes any hope of making a return on investment”.
Instone also cautions against something that “sounds too good to be true”.
“As professional investment advisers we often see the damage done. A moment’s inattention towards financial salespeople lasts an entire lifetime. Always conduct a lot of due diligence on any type of investment. Double check information with different firms and online. Take responsibility for building your own financial future by educating yourself on financial matters,” Instone said.