The Covid-19 pandemic has made us more content with what we have. Yes, you read that right. Thanks to the pandemic, the definition of wealth has shifted, according to financial services company Charles Schwab’s 2021 Modern Wealth survey.
An average of $1.9 million net worth is now considered wealthy – $700,000 less than the $2.6m required to be considered wealthy in the Charles Schwab poll last year.
A change in priorities has led to the decline in the benchmark to be considered wealthy. Added emphasis on mental peace, values and healthy relationships now trump the need to be rich. The value for money has also increased among individuals.
In the UAE, residents’ savings have increased during the pandemic, with bank accounts swelling to nearly Dh199 billion from Dh10bn from January to April 2021, according to the Central Bank of the UAE.
Now, wealth has less to do with how much you earn and more to do with savings. But is this a sustainable approach?
Easy money at your fingertips
Understandably, the Covid-19-induced movement restrictions and travel bans led to reduced spending globally. With fat bank balances, the willingness to earn money the traditional way seems to be fading.
As economies shut down, those fortunate not to experience job loss could tuck away discretionary savings or invest in a rebounding stock market. Many first-time investors ventured into trading during 2020, but without proper guidance.
Amateur investors, propelled by a social media frenzy and boredom, poured money into risky investments, such as special purpose acquisition companies and meme stocks. Thanks to the Reddit crew, the whiplash in meme stocks and cryptocurrency lasted much longer than expected.
The general population got too used to having easy money at their fingertips.
How to re-route?
Investors must think rationally with a long-term perspective. A minimalistic way of living is not the only option.
They also need to decide if they want to trade, invest or do both. None of the options are impossible with proper guidance and advice.
A thematic investing approach may be ideal to develop a macro-outlook on markets
Vijay Valecha,
Century Financial
While staying at home, investors adopted traits such as panic selling, pessimism and taking higher risk as they tried to replicate previously profitable trades without having a view on the instrument. This approach will not work anymore.
Here are a few tips to maintain financial stability when life reverts to the old normal.
- Don’t be embarrassed to seek advice. Naïve investors may succumb to emotions and not remain objective. Financial advisers often help investors develop the soft skills required to trade.
- A thematic investing approach may be ideal to develop a macro outlook on markets. Observing trends and volatility levels lead to more educated purchases. For example, the technology and space sectors are in the limelight now.
- As far as long-term investments are concerned, fundamentals lead the way. No matter how volatile times are, fundamentally strong companies are the ones that remain resilient.
- Making the same trade may not have uniform consequences for all. The one-for-all strategy does not apply in trading.
- Invest what you know, nothing more, nothing cliche. As billionaire investor Warren Buffet once said: “Be fearful when others are greedy and greedy when others are fearful.”
If a trade makes someone rich overnight, it is most likely not a skill but just good fortune. Once pre-pandemic times return, along with increased expenses, you need to be more than just lucky to make the right investments.
Consistently making the right call is crucial because luck will not get you by.
Vijay Valecha is chief investment officer at Century Financial.
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Sholay: a 1975 Indian action-adventure film. It follows the adventures of two criminals hired by police to catch a vagabond. The film was panned on release but is now considered a classic.
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
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The biog:
From: Wimbledon, London, UK
Education: Medical doctor
Hobbies: Travelling, meeting new people and cultures
Favourite animals: All of them
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Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
