Investment is not a one-time activity. For a financially secure and independent life, saving and investing should become a part of your life. Also, the sooner you start, the better chances you have of seeing your money grow exponentially. In this article, we will talk about the best investments for young adults. Before we start, there are certain things about investments that you must keep in mind:
- A successful investor always works according to an investment plan.
- A good investment plan is based on three pillars:
- Defining the investment objective/financial goals
- Determining the time horizon of investment
- Assessing your risk preference
- Starting young allows you to benefit from the power of compounding
- Diversify your investments – avoid putting all your eggs in one basket
- Always talk to an investment advisor to understand the finer details of the investment option before investing.
With these basics out of the way, let’s look at the best investments for young people in Dubai.
e-Saver Accounts and Bank Deposits
As a young investor, it is important to inculcate the habit of saving regularly. In Dubai, many banks offer an e-saver account which has a higher interest rate as compared to normal savings accounts. Moreover, debit cards are not issued for these accounts to discourage withdrawals. You can also opt for deposit accounts ranging from a period of 1-24 months and earn higher interest.
Stocks are undeniably the most preferred investment option around the globe. However, investing in stocks requires an understanding of the market and is usually considered to be a high-risk investment. While age being the best asset on your side, you can afford to take investment risks and might want to consider investing in blue chips. However, we recommend that you talk to an investment advisor and create a portfolio that hedges the risks well.
While stocks are great for investors willing to take risks with their investments, for the risk-averse investor bonds are a great investment option. In simple words, bonds are debt instruments issued by a company which provides interest against them. In Dubai, most bonds are traded in the form of Sukuk. If you prefer the western format of bonds, there are a few options for you too. Usually, bonds have a minimum holding period post which you can redeem them at an exchange house. For young investors, bonds can be a great tool to build capital with minimal risk.
Another investment option that has takers around the world is Mutual Funds. The Dubai International Financial Centre offers domestic well as international funds to investors. The fund types include equity, debt, growth funds, value funds, active funds, passive funds, and even funds compliant with the Sharia laws. As a young investor, the Mutual Fund landscape can be intimidating due to the number of options available. Talk to an advisor and keep your financial goals in mind before investing.
Investing in gold is one of the oldest and most reliable forms of investment. You can buy gold bars, bullion coins, gold jewellery, stocks of a gold mining company, bullion-focused mutual fund, etc. The Dubai Gold Souk is one of the largest and reputed gold markets in the world. It is considered to be a great hedge against inflation and is easy to sell. Further gold has low volatility and certainly beats keeping cash in the bank.
As a young investor, one of the biggest advantages you have is that of time. Therefore, it is important that you choose the investment options carefully so that you can make the most out of it. Purchasing a real estate property is a costly affair and spending a huge amount behind buying property can probably be the last thing on your mind. However, with adequate financial advice, you can ensure that you invest the right amount in real estate either by purchasing a property or by investing in a REIT or real estate Crowdfunding platforms.
Some tips for young investors
- Start investing as early as possible – It will reduce the financial burdens later in life.
- Research well and try to understand all investment options well before signing the dotted line.
- Ensure that you are clear about the pillars of investment specified above.
- An important step in successful investing is learning how to save and curb spending.
- Keep a tight leash on your debts.
- Understand the taxes applicable.
- Invest regularly.
- A credit score is an indicator of an individual’s financial health. Therefore, young investors need to build and protect their credit.
- There are many new investment avenues like cryptocurrencies, peer to peer lending, etc. launching regularly. Hence, it is important that you don’t chase the first shiny thing on the market but stick to the investment plan.
- Start slow and always keep the long-term objectives in mind.
Also Read: Dubai Investment Market
Becoming a successful investor is a slow and gradual process. Young investors need to ensure that they are certain about what they want to derive out of their investments else it’s easy to lose the way. Remember, every investor is unique and needs to create a portfolio tailor-made to his requirements. Avoid the urge of blindly following trends. Stick to the basics and earn your way to financial freedom.