How to start investing in the UAE

Be wary of those who chase you with ideas of super returns.

1) Start Early
An early start gives you a lot more time to multiply your money. A look at this table will tell you how much difference an early start to savings and investment can make. The table shows the results of Dh1 invested every year at different starting points and earning a return of 10 per cent per annum till the age of 60 years. As you can see, if you start saving at 25, the amount is nearly three times compared with the amount you would have if you had started at 35.

Starting Age	25 years	30 years	35 years
Number of years to 60 years of age	35	30	25
Total amount invested (AED)	35	30	25
Investment value at the age of 60	299	182	109

2) Expenditure=Income-Savings
Make a savings target no matter what your income. So Savings is the starting point and not a resultant number - or what is left over. This will force you to make a budget and prioritise your expenditure based on your income and lifestyle. In the absence of such an approach, you are unlikely to focus on Savings, without which you cannot build a pile of wealth.

3) Investment vs Consumption
Understanding this difference is very important, especially when the same expenditure could be classified as investment or consumption, depending on who is doing it and for what purpose.
An expensive car or house can be classified as consumption for someone whose earnings don't depend on it. It would be an investment for a professional consultant if his/her client regards him as successful, and therefore feels more confident about dealing with him, based on these status symbols. Expenditure on health is an investment and so is any expenditure on personal development. If you understand this, you will know how to prioritise your expenses. The question to ask yourself is this - will this in any way help in increasing my income in the future?
4) Borrow only for assets that will ?appreciate
Borrowing for depreciating assets is the worst thing that you can do from a financial perspective, unless as I mentioned earlier, you can treat them as investments. Also, avoid buying on credit - it comes at a high cost.
5) Choose your advisor or fund manager wisely
This is something that is not easily done, but if you are serious about building wealth, go after a good investment advisor or fund manager. It's very unlikely that a good one will come chasing after you. In fact, be wary of those who chase you with ideas of super returns.
6) Go for high returns
No one ever built wealth by investing in bank deposits or debt funds. You have to go for high returns and that means risk. Never be afraid to take risk, but for that you have to start early and have a good advisor/fund manager with you.
Maturity Value of AED 1 invested, depending on period and return

Rate of return	Number of years for which invested
	35	30	25	20	15	10
7%	10.7	7.6	5.4	3.9	2.8	2.0
10%	28.1	17.4	10.8	6.7	4.2	2.6
15%	133.2	66.2	32.9	16.4	8.1	4.0

The power of compounding does magic. Even a differential of three per cent return makes a big difference, especially over long periods - hence, start early.
7) Invest in equities and real estate
Equities and real estate give you the kind of returns that can build wealth. Every other asset class is for those who want to play safe. There will come a time when you also need to play safe (when your career is at its end or when you go through tough times). But when the going is good, make sure every bit is invested for growth and not safety.
While no one doubts real estate, people are generally scared of equity investments. They should be if they are speculating or if they are at a stage of life when they shouldn't be. You need to have a very competent, seasoned and honest advisor/fund manager. So go out and look for one. No one worth his salt will ever chase you.
Equity has delivered superior returns over debt and other asset classes, when considered over long periods of time.
8) Gold and Silver
Avoid these and investment in other commodities. Gold hasn't made anyone rich and that's what you need to understand. Yes, rich people buy gold, but then they are already rich.
Vivek Bhargava is a veteran investor and fund manager with over 25 years of investment experience. He is the founder Executive Chairman of WealthBridge Capital Advisors Private Limited, Hyderabad, India www.wealthbridge.in, a company that manages investments for HNIs and NRIs. He can be reached at vb@wealthbridge.in.