Top 10 Residential Areas in Dubai

By Smart Crowd Blog / November 28, 2018 / 0 Comments

10 best areas to invest in Dubai

By Smart Crowd Blog / October 31, 2018 / 0 Comments

Dubai Investment Market

By Smart Crowd Blog / July 20, 2018 / 0 Comments

Why Invest in Dubai?

By Smart Crowd Blog / May 19, 2018 / 0 Comments

Fixed deposits vs. Real estate Investment

By Smart Crowd Blog / November 28, 2018 / 0 Comments

Blog

Smart Investment Options for Beginners

Have you ever thought of investing your money into something productive? Do you want to invest your cash into something where you get good returns? You can invest in many ways, but some options are better than others. Read on below to gain a better understanding of what’s out there.

1. Investing in Mutual Funds or (SIP)

A Mutual Fund is a pool of savings for multiple investors. This common pool is created to invest in any one of the assets (of your choice) or many asset classes such as: equity, liquid assets etc. It is called Mutual Fund because all the rewards, risks, gains or losses arising from the investment made out of this savings pool is being shared by the investors in the proportion of their contributions.

mutual funds investment optionThere are two ways to invest in Mutual Funds:

Direct

People can do it by visiting the nearest Mutual Fund company or they can apply online. Forms can be availed and submitted to the Mutual Fund’s company office or can be downloaded from their company website.

Agents

Agents are professionals trained to help the customers who have doubts regarding the information on various funds provided by the company. They help in processing the applications and dealing with the issues regarding the redemption, cancellation, transfer of the dealings, amongst other things. Agents usually charge a small commission which is added to the purchase price of the funds.

Three types of Mutual Funds:

Based on Assets

  • Equity Funds
  • Debt Funds
  • Money Market Funds
  • Balanced or Hybrid Funds
  • Index Funds
  • Sector Funds
  • Tax-saving Funds

Based on Structure

  • Open-Ended Funds
  • Close-Ended Funds

Based on Investment Objective

  • Growth Funds
  • Income Funds
  • Liquid Funds

2. Investing in Gold

gold investment option

Gold is a good way to ensure wealth preservation to give to future generations. There are two ways to invest in gold- physical form and on paper.

Physical gold like coins, bars, jewellery are assets that can be physically held.

Paper gold involves future contracts and ETFs and is usually traded without the physical gold. These are often meant for short-term profits and liquidation, have lower premiums and are far riskier for the beginners to invest.

Gold premium signifies two things- Spot Price and Premium Price.

Spot Price is the current market price at which an asset is bought and sold for immediate payment and delivery. The Spot Price is calculated according to the recent average bid price offered by worldwide professional traders.

Premium Price is the added cost on top of the Spot Price to cover things like minting, transporting, storage and other additional costs. The premium charges differ from dealer to dealer.

3. Fixed Deposits

fixed deposit investment option

Fixed Deposits are investment instruments offered by the bank and non-banking financial companies, where one can deposit their money for a higher rate of interest than a savings account. You can deposit a lump sum of money in a fixed deposit for a specific period ranging from 7 to 10 years. Once the money is invested it starts earning interest based on the duration of the deposit. Money from Fixed Deposits cannot be withdrawn before the maturity period but one can withdraw the money after paying a penalty. Also, tax is deducted at source, from interest on Fixed Deposits.

Benefits of Fixed Deposits

  • Investors can earn higher interest on their surplus fund from the fixed deposit and can be easily renewed.
  • There is no risk on the returns of Fixed Deposits as they are assured.
  • No effect of market fluctuations on Fixed Deposits, i.e., the greater safety of your capital.
  • You get benefitted from the interest rates offered by the company FD.

4. Real Estate

reit investment option

Investing in Real Estate is an ongoing trend as it gives good returns over a long period of time.

Benefits of Investing in Real Estate

Steady Income

Most of the yield from Real Estate investment properties comes from rental income. Regardless if the property market is down, you will still continue to earn a steady rental income. You can invest in multiple properties all in one go to increase the positive cash flow.

Long-Term Financial Security

Investing in Real Estate provides investors with long-term financial security and brings financial reward if you have a steady flow of rental income. Unlike stocks, which can rise and fall sharply in value, land prices do not fluctuate at the same rate. If anything, your house price will increase over time because land is a growing asset.

Inflation

With inflation, the value of your property increases and with increased interest rates, your rental rate will increase as well.

Wealth Creation

As with any asset class, Real Estate has its ups and downs. If you stick with it, over time the value of the land will appreciate and yield positive results. Half of the world’s wealth is tied up in Real Estate because of its low volatility and eventual good returns.

5. Bonds

finance bonds investment option

When you buy a bond, you will lend money to the government or a company and in return, they will pay a certain interest rate. Bonds are different from a deposit that you can sell them because it is not mandatory to hold them until maturity.

Returns on Bonds

Comparative to bank deposits, bonds pay a higher interest rate, therefore they are a good option if a steady income from savings is the goal. If you hold the bond till maturity and the company doesn’t fail, you will get back what you’ve put in, and the interest rate promised. If you sell the bond earlier, you have money equal to the coupon rate.

Though bonds are safer than shares, they too have some risks such as  

Interest rate risk -where the market rates rise and we are earning less compared to other investments

Inflation risk -where a high rate of inflation lowers the value of the interest we earn

Liquidity risk – when you can’t find a buyer when you want to sell.

A government bond can be safer than the bond that was issued by the company. The downside is that safer bonds tend to have lower interest rates. Some bonds have a credit rating as to guide how risky they are.

Our Purpose

We all have a purpose for what we do, whether it’s going to work, playing sports or spending time with family and friends, there is a purpose behind our actions. Corporations need to have a purpose as well. Companies need to understand why they exist and do what they do. It must be more than just about making money and creating shareholder value. Without defining the purpose, you will never be able to measure your success. Without purpose, making money will never be gratified as you will want to continue making more at any cost.

strongly believe in purpose. Purpose gives you direction, it helps you develop empathy, it allows you to serve your customer better and engage all stakeholders to build a better ecosystem, or rather a world. I founded Smart Crowd to fill a personal need. The idea for Smart Crowd was conceived around the time when Brexit occurred. I was of the view that Brexit would take place and it will be an optimal time to purchase real estate in the UK due to the depreciating pound and the negative short-term impact it will have on real estate prices. It was a long-term investment view. I also thought it would be a good diversification play on US dollars as I essentially earned in USD and was overexposed to the currency. However, I struggled to find something I could afford. For personal reasons, I didn’t want to obtain financing to make my investment. I then tried to convince some family and friends to pool money together to purchase one property, but those efforts were also unsuccessful. That’s when I thought: Wouldn’t it be great if there was a platform were likeminded people like myself can come pool capital to purchase investment opportunities? Over the next few months, I did a lot of research around this idea which eventually evolved into Smart Crowd.

Parallel to this, I’m an avid follower of the capital markets. I obtained my CFA charter holder not for career reasons, rather out of personal interest. If you review my LinkedIn profile, you will notice my commentary on general investment philosophies and get a sense that I am always looking out for the little guy who is usually exploited in the process.

This personal interest in the capital markets and desire to educate the masses to steer them away from bad investment decisions fit with the idea of Smart Crowd and helped drive the purpose behind of Smart Crowd. Smart Crowd’s purpose is to provide people with an alternative to save and invest in real estate in a manner where they don’t have to take on too much risk and leverage. Real estate is not only a place we call home rather it’s a financial asset that historically has been restricted to the wealthy due to large investment requirements. The average person must save for many years or take leverage to climb the property ladder. The average person has to work harder for his/her capital, whereas the wealthy find it easier for their capital to work for them. I’m sure you all are aware of income inequality and the wealth gap is only getting wider.

Throughout the world, the middle class is being wiped out and very little is being done to solve the structural problems causing this phenomenon. A recent report by Boston Consulting Group found that 1% of the world population owns 45% of the world’s wealth. The report also stated that the wealth of the top 1% is growing almost twice as fast as the affluent segment. The BCG report predicts the wealthiest households, owning more than $100 million in investable assets, will see their wealth grow by around 9 percent over the next five years. Households with less than $1 million have expected growth rates closer to 4 percent. How is that fair? The ones in most need find it harder to accumulate and preserve wealth than those who don’t necessarily need it.

This is a big challenge and a challenge that can’t be solved by one organization. We collectively need to change our mindset and make structural changes to tackle this concentrated, accumulation of wealth. Just to be clear, I’m not advocating socialist policies to bring about this change. I’m a capitalist and embarking on my venture to make money but we all have a responsibility to help those less fortunate than us. It’s not only about giving equal rights to everyone it’s about being fair to everyone and not exploiting them as brilliantly depicted in the picture below:

We believe Smart Crowd is going to contribute to solving this challenge by giving the average person an opportunity to, “Unlock their wealth potential” by building a diversified real estate portfolio without taking on too much leverage and risk. As this asset class has been typically used by the wealthy to reserve and accumulate capital has been inaccessible by many for far too long. We want to give everyone an opportunity to be able to participate but also be able to spread their risk across different assets. We want to make an intelligent investor out of everyone by making them part of the “Smart” Crowd.

The overarching benefits of shared economy and crowdfunding business models

I was recently asked to participate in a roundtable at Urban Thinkers Campus in Dubai. The Urban Thinkers Campus is an initiative of UN-Habitat conceived as an open space for critical exchange between urban actors who believe that urbanization is an opportunity and can lead to positive urban transformations.

The Campus is a place to share, learn and brainstorm on the new urban paradigm established by Habitat III. It is also envisioned as a platform to build consensus between partners engaged in addressing urbanization challenges and proposing solutions to future urban and suburban challenges.

This great initiative is organized and lead by Dubai Real Estate Institute an arm of the Dubai land department. The theme I was part of was, “Real Estate Investment and Innovation”. Some of the questions we were tackling were …

1.     What are the real estate finance processes that are currently disrupted?

2.     How will crowdfunding change the face of the real estate finance cycle?

3.     Are there new financing policies and tools to encourage investors to develop programs pertinent to the SDG (sustainable development goals)? https://www.undp.org/content/undp/en/home/sustainable-development-goals.html

This was a very fitting event to be part of. I had founded Smart Crowd on the principles of levelling the playing field and giving the average person an opportunity to unlock their wealth potential by accessing an asset class historically restricted to the wealthy who have used it accumulate and preserve capital. It was great to discuss the evaluation of crowdfunding and peer to peer models that give the average person the chance to put their capital to work for them rather than continuing to work for their capital. Historically, that has not been possible in a significant manner where most of the population is continuously battling to work hard to build capital. There are many benefits of crowdfunding to the end user which I have discussed in other posts but there are also many socio-economic benefits of such models to the wider economy.

I genuinely believe that all businesses have obligations beyond the bottom line and shareholder value. Companies should contribute to the society at large which in turn will help grow their business further as there will be more users of their services or products. For this reason, one of the first things I did when I founded Smart Crowd was to have an independent economist prepare a white paper detailing the social-economic benefits of establishing a real estate crowdfunding model. The reason for such initiative was twofold, one to better understand what we can help achieve and second to educate the authorities on the benefits to win their support.

I have summarized some of the findings. There are many benefits but below are some that I find critical and relevant for the UAE market:

Broader Investor Base – By lowering the entry point into the asset class you are able to broaden the investor base to include the marginal investors that don’t have the ability to purchase investment properties outright or unable to secure necessary financing.

Diversified Real Estate building – Real estate crowdfunding makes it possible for individuals to create a diversified real estate portfolio without taking on too much risk and leverage. It allows individuals to put their capital to work whereas historically they had been purely focused on working to build their capital.

Creating a new transactional marketplace – The crowdfunding platform benefits not only the investors but also real estate companies and the real estate market by creating a marketplace where the sellers are connected with thousands of motivated investors. Depending on the platform and technology behind it can help eliminate inefficiencies in the transaction cycles while also making the pooling of investors and capital more efficient.

Convenience and Lower Costs – Traditional direct purchase model requires a lot of effort not only in gathering information but also dealing with many middlemen. The crowdfunding platform simplifies the process where one can access real estate market from a simple online portal.

Boosting the Real Sector and the UAE Economy-  By introducing new investors to the market can help absorb some oversupply. Typically, crowdfunding investors are long-term investors looking for a secondary source of income through rental income which helps to mature the real estate market. Also given the lack of options in the market for many to invest their hard-earned money most expats remit their savings back to their home country. Approximately $21 billion get remitted every year from UAE, even is such platforms can help retain 5% of the capital within the economy can have a significant multiplier effect on the economy which in turn should also help the real estate market.

Lowering risk to the financial system – Crowdfunding relives some of the burdens on the banking sector by creating an alternative source of capital as crowdfunded real estate investments are financed through equity, there is no creation of primary debt, and the result is a more stable financial sector.

Ease of FDI – crowdfunding platform makes it easy for foreign investors to test the market with small investments. Also, the ease of transaction makes it compelling for those that don’t have the resources to travel and gain access to market information. This is particularly attractive to the middle class of the UAE expat home countries from Egypt to India. There are many in those markets that would want to diversify their wealth by investing in UAE a market viewed as a safe haven in the region. Crowdfunding platforms make it easier for them.

I hope this helps you understand the benefit of crowdfunding platforms. If interested you can access the white paper detailing these benefits further on our website at www.smartcrowd.property . I genuinely believe models like Smart Crowd can help solve some of the social challenges around inclusion, income inequality and building sustainable cities and economy. By allowing a wider demographic to access the real estate market and unlock their wealth potential we can help create a sense of financial freedom. In turn, this will lower stress, making the population more productive and good corporate citizens contributing to making Dubai the “Happiest” city in the world.

Source: https://www.linkedin.com/pulse/overarching-benefits-shared-economy crowdfunding-farid-cpa-ca-cfa/

1 29 30 31