One should start investing early to allow money more time to weather the ups and downs of the financial markets and show real growth. If you haven’t started yet, now is the best time to think about it and act after creating a thoughtful and strategic investment plan.
When it comes to long-term investment planning and higher returns, one should focus on guiding principles instead of chasing cheap tips and tricks.
So, today, we are sharing fundamental guiding principles that will pave your way to successful investing in Dubai.
Determine Your Goals and Create a Financial Plan
Your financial goal is the cue to what kind of investments will benefit you. You can have any financial goal, such as savings for retirement, funds for your children’s college education, and buying a new home. Once you know what you want, get expert advice to create a financial plan to achieve your financial goals. Remember that people who have financial plans and stick with them can save several times higher than those who don’t.
Start Saving and Investing Right Away
There’s no better day than today when it comes to saving money. Since time plays the most prominent role in how much wealth you will have by your retirement age or set timeline, you must start investing as early as possible. The earlier you start with your financial goal, saving, and investing, the longer you benefit from the magic of compounding. You can read more about compounding: the eighth wonder of the world here.
Learn the Basics of Asset Allocation
In general, you should know about two types of investments: stocks and bonds. While stocks are considered high risk with high returns, bonds are more stable with lower returns. To diminish the risk exposure, divide your money between these two options and try to find the equilibrium between risk and stability. Your asset allocation depends on your age and lifestyle. For instance, you can take more risk on your investment portfolio while you are younger than in your 40s or 50s. There are many other types of investments such as commodities, cryptocurrencies, property, etc. One should seek consultation with a financial advisor on these more complex financial products.
Create a Portfolio for Diverse Investments Depending on Your Risk Tolerance
The investment market is volatile, and things can change even before realizing it. Savvy investors take precautions by investing in at least two areas. Based on current savings and earning, determine how much risk you can take because the level of risk increases exponentially as the expected return increases.
Suppose you are a low-income earner and planning to save money for your children’s education or stress-free retirement. However, if you are single and do not have any significant debts to pay, your options can quickly change when diversifying your investment portfolio. In that case, you need to find what allocation of mixed investments can keep possible risks down and stabilize your returns.
Build Protection against Crisis and Major Losses
While many businesses didn’t forget the global financial crisis of 2008, many companies and individuals faced a severe crisis due to the coronavirus pandemic. They are finding it extremely hard to recover from losses, mainly because most of them had no funds for backup. If this crisis also impacts your business or livelihood, you already know how difficult it is to manage and recover from such hard blows. In such scenarios, you can quickly recover faster when you hold cash, have defensive assets, and/or invest in money market instruments or securities.
Reassess and Balance Your Portfolio Regularly
As mentioned above, the investment market is subjected to volatility, and hence, the market keeps changing. Besides, life is also unpredictable, which can eventually change your goals and risk tolerance. So, work with your financial planner in Dubai to keep your financial goals aligned with your diversified investment portfolio.
Follow the Buy and Hold Strategy and Ignore the Market Noise
The Buy and Hold Strategy is meant for investors who buy or invest in securities and schemes for a long time to achieve higher returns. Since your investment plan is a long-term saving plan, avoid knee-jerk reactions and ignore the noise. The investment market will always fluctuate for short-terms. So, you must stick to your plan and keep working towards your goals unless there is a substantial change that transforms the whole scenario of the investment market.