Do you have money and want to invest in Dubai but you lack the knowledge? If YES, here are 13 best ways to profitably invest in Dubai and how to go about it.
Dubai has come very far in just a span of a few short decades. There has been monumental advancement in its economy, infrastructure and standard of living. According to IMF, UAE’s economy was predicted to further strengthen in 2019, even though it already enjoys a high per capita income along with a significant annual trade surplus.
UAE, along with its liberal business environment and tax-free zones also provides a dynamic financial sphere for potential investors. These reasons go to show that presently, the UAE market holds tremendous potential for willing investors. There are a variety of investment opportunities available for people to gain a high Return on Investment (ROI).
However, it can be daunting to research the myriads of investments in the quest of seeking the best investment in the UAE. That is why we have made concerted attempts to bring you some of the best investment opportunities you can undertake in the Emirate, and how you can go about them.
13 Best Ways to Profitably Invest Money in Dubai and How to Go About It
- Invest in stocks
Stocks are one of the most popular investment options in Dubai. One good thing about this investment option is that you can go in with what you have. Stocks are quite affordable and you can buy shares from some of your favourite companies for less than Dh100. You should know that while investing, it is ideal to buy multiple stocks, say, a minimum of five or six, to have a diversified portfolio.
It is important to note, however, that when buying stocks, one must enlist the services of a discount broker instead of a full-service professional, which only works with investors who have a lot of money to invest or those who can afford to pay a high minimum deposit and commission. This can be done by opening an account with an online discount brokerage firm. The other option is to buy shares directly from a company, if you want to save on brokers’ fee.
- How to Invest
You can invest money in UAE stocks simply by opening a Demat & Trading a/c with some stock broker. But, before you go for stock investing never forget that share markets are highly volatile in nature. This volatility can generate money quickly but can also result in loss of money with the same speed.
Whenever one trader gains another one will lose money. You can gain profits in stock markets only through understanding the basic rules of investing as well as through selection of right type of stocks.
- Go for exchange-traded funds (ETFs)
An Exchange Traded Fund is a combo of an index fund and a share. Basically, it is an open-ended investment fund that is traded on the stock exchange. It helps you make trades without dealing with the underlying assets that might mess it up. Like stocks, exchange-traded funds (ETFs) can be purchased at low costs through a broker, and the investor can invest as many shares as they like.
ETFs use pooled money from a number of people to acquire a diversified portfolio which may include stocks, bonds, commodities. They are traded like stocks and can offer a good return. Since diversification is the key when investing, no matter how small or big the seed money is, it is best to set aside a portion of your Dh2,000 for some ETFs.
- How to Invest
If you plan on investing in ETF’s, you will need to choose a broker. Look for ones that don’t charge commission. This will allow you to buy shares without having to pay unnecessary fees. Find out as much as possible about your broker, and make sure you look into their background too. If you want to go at it alone, there are many execution-only investment platforms to choose from such as: Internaxx and Saxo Bank.
- Mutual funds
A mutual fund (MF) is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed. Mutual funds are a good long term investment option which is considered as a cheaper alternative for stocks.
It is managed by a fund manager where he collects a pool of money from investors and invests in stocks, securities, bonds, etc. When a fund manager collects money from an investor, he tends to split the money into smaller parts and invest in different company stocks.
This will reduce the exposure to risk. It is one of the best investment options that can be considered by investors in Dubai who are willing to invest a small amount. After a certain time period, the investor will start making profits according to the mutual fund type chosen.
If you don’t have the time to do some research on your own to pick the best stocks, ETFs or other small investment options to park your small savings in, you may want to invest in mutual funds. By choosing this option, you can benefit from the expertise of a fund manager, who will do the homework for you – such as selecting the best securities, or stocks and bonds that could make your money grow.
The good thing is, you don’t need hundreds of thousands of dirhams to start buying shares. And like stocks and ETFs, mutual funds have also offered good returns to investors.
- How to Invest
Many banks like Emirates NBD, First Abu Dhabi Bank have asset management companies which offer funds depending on the risk profile of clients. You can contact them if you want to invest.
Dubai is the land of the precious metal, Gold. Gold is another form of saving which has a good resale value. It can be sold at any time and get a good profit. It is a safe investment that helps in the long run. The gold market keeps fluctuating on a daily basis.
So before investing in it, you must analyze the market and invest at the right time. Investing in gold is effortless as you only need to purchase some from a reliable source, but there are many nuances that must be kept in mind before going for the investment in the precious metal.
This precious metal is regarded as a great store of wealth in Dubai, and it is recommended that while investing, you should set aside five per cent of the money for gold, to avoid getting your savings eaten away by inflation. Gold is a safe haven and does well when equities do not perform, which adds a good diversification to mutual funds and other traditional investments. Gold is thus a good investment for everyone
How to Invest
- Gold Fund & Stocks: Purchasing stocks from a gold mining company is a very common method of investing in gold. On another note, one can also buy from an investment fund that runs on investments in gold bullion. There are a number of brokerage houses that trade in these kinds of investments.
- Collectible Gold: Purchasing gold in these forms is yet another viable option, where you pay taxes on all the gains, which you reap from selling the gold at collectible rates. Although this option allows generating a lot of revenue, a large part of it goes into paying taxes. Currently, the rate hovers around 28%.
- Gold Bars & Bullion Coins: Bullion is a large amount of physical gold, of all purity standards, and is usually evaluated on the basis of weight. Mostly cast as ingots or bars, bullions are sold by distributors, bullion brokers or even by some banks. Banks are mostly a good place to buy bullions, should you choose to invest in gold this way.
- Real Estate
The real estate market in Dubai is one of the most thriving worldwide as it expanded a lot during the last few years. The most important factors leading to the development of the real estate market in Dubai are the tax system, the quality of the buildings and the rapidity they are built with, the demand of investors looking to set up businesses in the region.
But is buying property in Dubai a good investment? Well of course! Thanks to the presence of a plethora of futuristic, cosmopolitan projects and uniquely designed residential communities the emirate is a haven for property investors.
The upcoming projects for Expo 2020 are also contributing to creating more investment opportunities in Dubai for buyers. With the market favouring buyers in the past few months, the time is certainly perfect for those looking at property investment in Dubai.
How to Invest
- Know what you want: Foreign buyers often choose to purchase apartments, townhouses, or villas, which are generally located in secure complexes with communal leisure facilities such as tennis courts, swimming pools and gyms. So know what you want.
- Start searching online: As with any property search, a good place to start is online. There are numerous agencies and estate agents that list properties in Dubai online. You can buy properties from estate agents or from property developers.
- Look out for Specialist agents: Talk to someone with specialist knowledge about the property market in Dubai, it’s best to employ an estate agent to work with. Estate agents can help you find properties and explain your options to you. Big real estate companies will be used to dealing with foreign buyers. You may also not have a problem with language because they do speak English.
- Attend property fairs: The property market in Dubai is still relatively young, although growing fast. As a result, a significant amount of property bought by foreigners is bought from developers who may not have built the development yet. Property fairs are a popular way for developers to present their work and meet potential buyers.
- Get your ID and papers regulated with the Full costs: Since 2002, it has become much more straightforward for foreigners to buy and rent property in Dubai. However, you still need to present a valid passport to prove your identity. Determine the full cost of the property that you are buying and also check whether the cost of the agent/broker is included.
- Pay a Visit: Spend a little time in Dubai. If you are buying a resale property ensure that you view as many properties as you can, and ask the same questions you would ask if you were buying property anywhere else in the world.
- Deposit accounts and e-saver accounts
These are accounts designed specifically for the banks, to provide higher returns to the customers. Deposit accounts range from fixed deposits of 1-24 months with higher interest rates. Similarly, e-saver accounts offered by banks such as HSBC, Emirates NBD, Mashreq, and ADCB bank offer saving accounts which have a higher interest rate compared to other savings accounts. These accounts do not come with any debit cards, to discourage withdrawals.
- How to Invest
Since these accounts are run by banks, you have to pay a visit to your bank if you want to start this mode of investment.
There are a wide array of fund investment options available at the Dubai International Financial Centre. Funds range from domestic and international to foreign funds. There are different kinds of funds such as equity funds, fixed income funds, value and growth funds, sector funds, active and passive funds, and Sharia-compliant or non-compliant funds. It depends on the financial objective of the investor to choose one which aligns with the same.
- How to Invest
The investment fund can be established following the preparation and approval of its prospectus. Prior to these steps, the investor must select and register a vehicle which will be used for the administration of the fund. The 3 types of vehicles recognized by the authorities in Dubai are: the investment company; the investment trust; the investment partnership.
These types of entities must be registered with the Dubai Economic Development Board. The minimum amount required to set up a qualified investment fund is 1 million USD. Also, the fund must have at least 50 qualified investors in order to be set up.
Investment in bonds is considered to be safer and more suitable for risk-averse individuals. It also offers better returns compared to any other investment options such as a certificate of deposit or Fixed deposits. Unlike stocks which are an equity instrument, bonds are a debt instrument issued by companies and provide interest against it.
The value of the bond is returned upon maturity. In Dubai, since Islamic law considers interest as haram, bonds are traded in the form of Sukuk. However, there are also a few bonds that are traded in the conventional western format.
- How to Invest
The most common place to find a bond is at the post offices. Apart from post offices, there are 700+ places in UAE where you can purchase these bonds. For making it easier for the people, the Government of UAE also allows an online purchase of national bonds. These bonds can be purchased on www.nationalbonds.ae where you can purchase as many bonds you wish.
There is a minimum investment requirement of 100 AED, where you can get ten bonds valued at AED 10 each or even a single bond valued at 100 AED. There is no upper limit, however, and you can purchase a bond of any amount greater than 100 AED. They can be redeemed at any exchange house after a minimum holding period of 90 days.
The Middle East has embraced the digital currency explosion and many governments in the Middle East have begun collaborating with financial companies to issue their own cryptocurrencies. In addition, a slew of cryptocurrency exchanges and companies involved in initial currency offerings (ICOs) have begun all over the Middle East, including in the Emirates.
Investing in cryptocurrencies is a highly speculative affair. Therefore, anyone considering investing a chunk of their money in cryptocurrencies should be mentally prepared to lose all of their investment.
How to Invest
- Open an Account at a Cryptocurrency Exchange: Here’s a partial list of cryptocurrency exchanges based in the UAE and internationally that accept accounts from Emiratis: BitOasis, Palmex, Bitfinex, BC Bitcoin, CEX.IO, Changelly, etc.
- Get a Cryptocurrency Wallet: In order to have full control over your BTC or any other cryptocurrency transactions, you must withdraw your bitcoins from the crypto exchange or another source to a personal crypto wallet and then protect your wallet’s key appropriately.
The wallet communicates to the crypto network when you want to send and receive transactions. A wallet address is similar to an email address, except that you can use your wallet address to make purchases and receive payments. Wallets can be installed on a desktop computer, laptop or tablet, as well as on an Android or iOS smartphone
- Withdraw your BTC to your Wallet: After you buy your bitcoins on an exchange or another source, you may withdraw the currency to your personal bitcoin or multi-currency wallet. Leaving your bitcoins in an exchange can be risky since exchanges can get hacked and you do not have control of your private keys.
- FCNR Deposits by NRIs
An FCNR account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. Thus, FCNRs are not savings accounts but fixed deposit accounts. When opening this account, you can make a choice of other foreign currencies.
Based on your travel and immigration needs you can save in these accounts from period ranging from 1 year to 5 years. In the event of emergency you can break the deposit, to withdraw your money without any reduction in capital, however the interest paid would be relatively lower.
Prior to 2011, FCNR deposits were allowed to be maintained in six currencies: US dollar, Pound Sterling (GBP), Euro, Japanese Yen, Australian dollar and Canadian dollar.
However, in October 2011, the RBI decided that authorised dealer banks in India may be permitted to accept FCNR deposits in any permitted currency. ‘Permitted currency’ for this purpose would mean a foreign currency which is freely convertible and popularly include Danish Krone, Swiss Frank and Swedish Krona among others.
- How to Invest
The funds in an FCNR account must necessarily come from your overseas funds. There are several ways in which you can open an FCNR account.
- You can transfer funds from your overseas bank account directly to open an FCNR account. You can do this either as a wire transfer or a cheque transaction
- You can transfer funds from an existing NRE account
- You can open an FCNR account using foreign currency notes or travelers cheques
- Open Architecture Investment Platforms
Open architecture is used to describe a financial institution’s ability to offer clients both proprietary and external products and services. These platforms provide a wide range of investment options like funds, Low cost ETFs, Equities, REIT’s and Structured Notes.
On these platforms you can invest in equities and bonds of major exchanges like London, New York, NASDAQ Borse/Frankfurt, Euronext, HongKong and Tokyo. Such platforms give you a wide choice of asset classes to invest and also there are no surrender penalties or lock in periods. They are pay as you go accounts with the flexibility both growth and liquidity.
Open architecture ensures that a client can satisfy all their financial needs and that the investment firm can act in each client’s best interests by recommending the financial products best suited to that client, even if they are not proprietary products.
- How to Invest
Banks and investment firms generally offer one of two main types of investment platforms, referred to as “open architecture” and “closed architecture”. If you are interested in either, you can just contact them.
- Initial Public Offer (IPO’s) in UAE
Initial public offering (IPO) is the process by which a private company can go public by sale of its stocks to the general public. The number of shares listed is usually a percentage of total stock which allows the company to raise capital when buyers purchase the shares.
UAE is maturing as a financial market, and many family businesses are considering going public. With Oil prices stabilising around $60-$70, more IPOs are on the cards. Some of the IPOs expected shortly are; Abu Dhabi Ports, Emirates Global Aluminium, Sennat & Gems Education.
Also, the big one Saudi Aramco’s IPO happened just very recently. One can also invest in Sukuks issued by various companies in UAE, and some of them like DEWA Sukuk provide good returns as well.
- How to Invest
Initial public offering (IPO) can be bought on the floor of the stock exchange, so you need to contact a broker if you want to invest.
13. Factor Investing
Factor investing is an investment approach that targets specific return drivers over multiple asset classes. Macroeconomic and style are the two chief factor types. Benefits of factor investing include enhanced diversification, improved portfolio outcomes and reduced volatility.
Factor premiums have been extensively documented in academic literature for over four decades. Although they were initially discovered in the stock market, these premiums can also be found in most asset classes, including bonds, currencies and commodities. It is possible to apply factor investing across and within different asset classes.
- How to Invest
You need to contact a knowledgeable broker or investor if you want to engage in factor investing in Dubai.
Listed above are amongst the best investment options in Dubai. While stocks, bonds, and mutual funds have their own benefits, investing in real estate is the simplest and easily recommended option. With the World Expo 2020 with us now, the Dubai market is expected to grow exponentially, having a major impact on property values.
It would be wise to hire an independent financial advisor to help you choose the most suitable investment or insurance plan, based on your goals, time horizon, risk tolerance and the current financial situation.