How to build wealth in Dubai?
When people want to save money, they usually put their net disposable income into a bank account so that it grows into a sizeable capital.
These funds can be used to achieve financial goals like; property investment, funding for children’s college education and retirement, etc….
While their money is relatively safe, the bank only pays a minuscule rate of interest. Not only the returns are limited, they never keep pace with the rampant inflation, decreasing the purchasing power of your money saved.
Although putting money in a savings account is a sure bet, your gains will be minimal, given the extremely low-interest rates. But don’t forgo one altogether.
A savings account is a reliable place for an emergency fund, whereas a market investment is not.
Learn more about investing, read my article – How to invest money in UAE, using 3 Bucket Investment Approach…
Effects of Inflation
Banks in UAE offer interest rates between 0.50 % – 1.75 % on different types of savings accounts, while the inflation is around 4% – 5%, the purchasing power of your savings decreases by 3% – 4% every year.
For Eg If you have a deposit of AED 100,000 in a bank, earning 2% interest, by the end of the year, the account value would be AED 102,000.
If we assume an inflation of 5.00 % per anum, you would need AED 105,000 next year, to buy goods or services, currently valued at AED 100,000/-. Which means you will have to shell out an additional AED 3,000/- next year to buy same value of goods or services.
The following video will explain, inflation better;
How to beat inflation?
The best way to beat inflation is to put your money to work, instead of you doing all the work for money, i.e.,; Investing.
Investing can be much more rewarding, than just beating inflation, if a long term view is taken. One can use a broad range of investment solutions to put his money at work.
Investing in a portfolio of multiple asset classes like; Equities, Bonds, Mutual Funds, ETFs, Commodities and Real Estate can potentially grow your investment by 10% – 12% average, helping you beat inflation.
When looking to invest, it is important to consider the following;
- Establish realistic goals & investment time frames for each goal, be sure of what you are hoping to achieve and by when?
Ascertain how much you can invest, and how you can invest; choose between a lump-sum, or regular or a combination of both.
Talk to an Independent Financial Adviser, and obtain adequate information on various investment plans and the underlying asset classes.
Diversify your investment into 3 – 4 asset classes
Strike a balance between safe and riskier investment, depending on your risk appetite
Monitor and review your investment regularly with your financial adviser, and make necessary changes, to adapt to the market fluctuations.
Your investment will not only beating inflation but will also help you achieve your future aspirations.
Investment Plans like Vision from Generali, Vista from Zurich and Premier Advance from Friends Provident International can help you invest your disposable income efficiently and beat inflation, which a savings account in a bank cannot.
To know more about investing to beat inflation and to help you achieve your financial goals, call me on +97150- 2285405 or register to arrange a free initial meeting.