Savings choice depends on your individual goals

I have recently moved from India to Dubai for long-term work in a company. I would like to start investing a small amount from my salary for my future. I can only contribute Dh2,000 to Dh3,000 per month. What suitable options are available? SS, Dubai

Expert 1: Sam Instone, managing director of AES International

Just like regular exercise improves your health, regular saving is excellent for your wealth. Both are hard to start and require considerable discipline to continue with for any length of time. Similarly, the wrong technique can do far more damage than good, and the UAE is packed to the rafters with banks and financial salespeople who want nothing more than to sell you a toxic contractual savings product. Not only does this mean that your first year or two of savings go towards funding their commissions, but the funds available and product charges will ensure your investment performance goes backwards rather than forwards.

Just like getting fit or losing weight, I recommend defining your objective before you begin so that you have a target to aim for, such as buying a house or retirement. Once you have a target you can work out a plan on what you need to do to get there using a free online savings calculator, such as the one found at

My advice would be to dodge the insurance company-based contractual plans offered by banks and financial salespeople – the hidden commission associated with these 15 to 25-year contractual terms will decimate your financial future. Instead I would either save money into the best savings account offered by your bank each month or open a direct investment account with an online broker and invest in low-cost index funds, or exchange-traded funds, from companies such as Vanguard. These are an excellent investment because the evidence demonstrates they outperform more expensive mutual funds that are commonly sold to retail savers. If you are not sure which funds to choose from, there are plenty of books, articles or fee-based advisers that can help.

Patience, diversification and low investment costs are the key to making good returns over the long term. Always read the terms and conditions carefully, check and double-check what anyone tells you, and avoid commission-based advisers where the advice is ostensibly free but actually horribly expensive.

Expert 2: Tom Anderson, chartered investment adviser at Killik Offshore

I usually recommend that people build up a cash buffer – maybe three months’ worth of expenditure – before deciding to start investing. This is to ensure you can keep paying for essentials such as food, rent, insurance and utilities if something unexpected happens.

Once this is done, confirm your objective, and then identify how you are going to achieve your goal without too much risk and volatility.

At this point, we can make a few assumptions:

• You are looking for growth because

• You have a fairly long-term time frame but

• You may need access to the cash before then so

• You don’t want to be locked into a contractual payments plan or to have the portfolio trapped in a structure you cannot access, and the investments must be liquid (meaning you can sell at any time and realise the cash immediately).

• Your investments must be efficient, so be wary of management fees, custody charges, dealing costs and other outgoings. Some of these are inevitable, but try to minimise them.

This is probably a useful checklist, but underpinning all this is the importance of actually buying assets that have the potential to achieve your investment objective.

Given the very low rates of interest offered by banks and the volatility in today’s investment markets, building a suitable investment portfolio can be tough.

Next month’s question:

My stepdaughter was born in the United States to British parents who have kept their British citizenship. What would be the status and approximate cost of her attending university in the United Kingdom? JF, Abu Dhabi

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