Those who want to secure their future have several options to increase their income



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By Vijay Valecha

Published: Fri, March 4, 2022, 12:06 PM

Dubai’s new savings plan for expatriates in the public sector has highlighted the need to prepare financially for retirement.

Studies have shown that many expatriate employees in the country are not doing enough to ensure a decent retirement life, with an overwhelming number relying solely on their gratuity. Three out of five even told a poll that they had no long-term savings.

Those who wish to secure their future and enjoy life after decades of work have a number of options for increasing their income. Here are some patterns an expat can explore and 10 ways to invest, depending on their risk appetite.

1. Try domestic bonds, a risk-free option

For investors looking for security, Dubai National Bonds offer the opportunity to earn more than their bank deposits thanks to the two-year call plans. Returns can be as high as three percent per year for virtually no capital risk. Investments can start with as little as 10,000 Dh.

2. Make the Most of Affordable Real Estate Mortgage Plans

The UAE’s cutting-edge approach to the pandemic has sparked interest from the world’s wealthy, who continue to flock to the UAE, boosting property companies. A positive macroeconomic outlook – bolstered by higher oil prices, high vaccination rates and global events like Expo 2020 in Dubai – should spur the UAE real estate market to recover. The availability of mortgage plans from various banks has made the sector much more affordable. Additionally, there are now apartments available for as low as 300,000 Dh. Liquidity will be a concern as ticket size is important.

3. Stay up to date and find opportunities

With sanctions against Russia likely to impact oil production in the medium term, Saudi Arabia’s largest company, Aramco, will be one of the main beneficiaries. The company’s market capitalization has already reached $2.36 trillion and the dividend yield currently stands at 3.18%. There is a good chance that dividends could increase this year due to rising earnings. In addition, the business is also a hedge against inflation.

4. Get to know the best companies

Abu Dhabi National Energy Company PJSC (TAQA) is an international energy and water company operating in 11 countries on four continents. It is an energy holding company controlled by the government of Abu Dhabi, United Arab Emirates. TAQA is one of Abu Dhabi’s flagship companies and as such has a vital role to play in helping to deliver Abu Dhabi’s economic strategy. The company with a market capitalization of Dh143.91 billion is ideal for long-term investment.

5. Opt for long-term investments

Investing is a strategy focused on managing and growing wealth in the market over a longer period of time – we are talking about years or even decades. The longer the money is invested in the market, the more opportunities there are to capitalize on compound interest or returns. Using a Systematic Investment Plan (SIP) strategy will help spread the costs and generate excellent returns. A person who invested $1,000 per month for 20 years at an 8% return would now be able to generate wealth of $589,000.

6. Consider dividend stocks

Dividends are recurring payments made by companies to the owners of their shares. They share part of their profits with investors in proportion to their stake. Investors should ideally seek out Dividend Aristocrats, companies that have increased their dividend every year for the past 25 years. Studies have shown that dividend-paying stocks outperform non-dividend paying stocks by 2-3% per year over the long term. In the US, dividend-paying stocks outperformed with an average annual return of +9.7%.

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7. Do some research on crypto

Cryptocurrency is a kind of digital electronic money only intended to serve as a medium of exchange. It has become a hot topic in recent years. Cryptocurrencies are good for investors looking for risk in exchange for the potential for much higher returns. However, it is essential that investors do their homework and only invest a small portion of their bonus. And while they can buy crypto on an exchange, perhaps investing in a diversified crypto ETF is best.

8. Invest in gold

Investing in SPDR Gold Trust offers investors a relatively profitable and safe way to access gold and diversify their portfolios. Since its listing on the NYSE in November 2004, SPDR Gold Shares has been the largest physically backed gold exchange-traded fund (ETF) in the world. It offers extremely tight bid/ask spreads, making it ideal for investors.

9. Review commodity-focused ETFs and mutual funds

The price of a product generally depends on supply and demand factors. As a result, they are generally more profitable during a supply chain crisis, such as today. But they are still risky – a slight change in geopolitical situations, natural disasters and droughts can all have a huge impact on your profits. Thus, investors may prefer to invest in commodity-focused ETFs and mutual funds rather than commodity contracts.

10. Explore investment grade bonds

The SPDR Portfolio Aggregate Bond ETF (SPAB) provides exposure to investment-grade US bonds, including treasury bills, corporate bonds, mortgage-backed securities and asset-backed securities. The ETF currently yields 2.16%.

Vijay Valecha is Chief Investment Officer at Century Financial