How To Do It: Invest as per your objectives

For the typical expatriate investor in the UAE, there is a wide selection of products in the market.

They should be able to provide the opportunity for anyone's financial requirements to be tailored to personal needs with choices likely to suit all, from the very conservative to the more aggressive investor. In economic terms, investors range from risk averse to risk seeking.

Most advisers would suggest diversity in any portfolio and it would be unusual to see a person choosing a single investment fund rather than a combination.

But there are expats out there who are still reeling from the equity markets' blow out with many of them having been advised (or should that be conned?) to put all their eggs in one basket, viz., hi-tech stocks.

Prior to deciding which route to take, investors should set up their own personal goals and objectives; what they actually want to achieve from any investment.

If so desired, a combination of investment funds can be selected by allocating a percentage of each in contribution to the selected fund. The final decision will be a result of a number of considerations including:
* age
* time frame to retirement
* attitude to risk
* prevailing economic conditions, and
* current tax and legislative climate in home country.

Of these five listed items, the risk factor is the one that really needs further clarification. The relationship between the amount of risk a person is willing to take and the potential return on investment is known as one's risk profile.

Generally, investments that have high returns, e.g. growth, carry the highest risk. Not only does the rate of return fluctuate but the value of capital can increase or decrease.

For investment funds that tend to earn lower returns, the capital value is less likely to vary. Circumstances do indeed change and with it one's investment goals and portfolio strategy.

Consequently, it is recommended that investors check at least annually with their adviser and ensure that their allocation of funds is still appropriate in line with their current needs.

Never forget that by spreading one's investments across a number of asset classes, the overall risk of one's portfolio is reduced. Diversification is often the key to a successful investment strategy.

A lower risk investment with lower returns will provide a steady stream of income. Lower returns result in a slower growth rate than maybe other investments in one's portfolio but it would be expected that the capital value is less likely to fluctuate.

Most investment funds are bought in units and these will often be valued on a daily basis. The value is determined by what assets are included in the 'basket'.

For instance, listed shares can be valued at the latest sales price quoted on the local stock exchange or fixed interest will be at market value. Any expenses, such as management fees and other liabilities, will be offset. The unit price is then derived by taking the value of the investment divided by the number of units in the fund.

Traditionally, investors requiring income now rather than later opt for income trusts while those aiming to build a lump sum would go for a unit trust promising growth. But in these turbulent times, there are different types of income trusts that could suit those investors looking for growth.

There are some income trusts that pay high dividends allied with an element of growth; the idea is to reinvest any income so that extra growth potential is assured.

Bonds, especially those from blue-chip companies, are worth consideration as they tend to produce higher income and are more stable than shares per se.

An alternative strategy would see investment in bonds from less secure companies and because there is more risk attached to investment in this sector the returns will be theoretically greater.

Another avenue would be to have a mix of funds in both equity and bonds so there is a combination of higher income potential (from bonds) and higher growth (from shares).

As to be expected, most companies will place restrictions on early exits and the fine print will need to be carefully perused. That being the case, remember the words from Desiderata: "Exercise caution in your business affairs, for the world is full of trickery."

These words are probably more valid now than when Max Ehrmann wrote them so many centuries ago.