UAE investors’ passion for crypto, especially Gen Z, and gold sparks diversification call

One in ten view cryptocurrencies as the best way to generate inflation-beating returns


Somshankar Bandyopadhyay

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Published: Wed 24 Jan 2024, 5:28 PM

As they seek investments that will beat inflation, UAE residents are showing as much appetite for speculative bets on cryptocurrencies, particularly amongst younger investors (18-24) as they are for funds that buy shares in companies, according to a new survey from International Financial Group Ltd (IFGL).

In its poll conducted in late 2023 with over 1,000 UAE residents, IFGL found that one in ten view cryptocurrencies as the best way to generate inflation-beating returns, with the greatest interest coming from Emiratis; equal to those who choose mutual funds and just ahead of those who choose exchange-traded funds (9%). Gold, preferred by Emiratis and Asians, and UAE property jointly topped the ranking, both at 24%.

Male respondents prioritise UAE property, gold, and fixed-rate deposits, while females favour gold, UAE property, national bonds, and fixed-rate deposits. Cryptocurrencies are more appealing to males (12%) than females (6%). Age influences investment preferences, with those aged 18-24 years preferring Crypto, 35-44 year olds preferring home country property and 25-34 year olds opting for UAE property. Individuals aged 45 and above show less interest in cryptocurrencies and ETFs, with IPOs least favoured overall. Higher incomes lead to a preference for equities/mutual funds

“Some UAE investors are clearly pursuing risky strategies whereas they should be building a diverse portfolio of assets with different risk and return profiles,” said Simon Barwell, IFGL’s Marketing Director. “Cryptocurrencies have a history of volatility while property is an illiquid investment, so UAE investors should be thinking about equities and bonds too, both locally and overseas. A balanced strategy is the key to long-term wealth accumulation.”

Diversification is a common investing technique used to reduce your chances of experiencing large losses. By spreading your investments across different assets, you’re less likely to have your portfolio wiped out due to one negative event impacting that single holding. Instead, your portfolio is spread across different types of assets and companies, preserving your capital and increasing your risk-adjusted returns.

Mutual funds and exchange-traded funds (ETFs) can be excellent tools for diversifying one’s portfolio. Most mutual funds and ETFs are invested along the lines of a specific asset class, whether stocks, bonds or cash. Some funds are a mix of different asset classes; these balanced funds generally invest specified portions of the fund in stocks and in bonds.

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