For Indian residents in the UAE, the promise of tax-free income and a higher earning potential makes investing an exciting prospect. Yet, despite the opportunities available, many fall into the same financial traps, often without realising the long-term impact.
From currency risks to an over-reliance on familiar assets, these mistakes can significantly erode wealth. The good news? A few smart adjustments can make all the difference.
Traditional savings and investments
Many Indian residents instinctively send a large chunk of their savings back home, investing in fixed deposits, real estate, or mutual funds. It feels like the safest bet – after all, there’s comfort in familiarity.
But here’s the catch: the Indian rupee has consistently depreciated against the US dollar – and, by extension, the UAE dirham. On average, the rupee has lost about 2.7 per cent of its value annually against the dollar in the last decade.
That means an investment that seems profitable today might shrink in real value when converted back later. The key is to strike a balance – holding assets in both the rupee and dirham to hedge against currency fluctuations.
While these have historically been safe choices, they don’t necessarily offer the best returns or liquidity. What happens when the real estate market in India slows down or gold prices stagnate?
Many residents fail to explore the diverse options available in the UAE – stocks, bonds, real estate investment trusts and market-linked investment plans that can provide better growth and stability. A well-diversified portfolio tailored to long-term goals is the best way to protect and grow wealth.
Diverse investment options
Surprisingly, many Indian residents don’t take full advantage of the UAE’s financial ecosystem. The local market offers investment-linked insurance plans, structured products and equity funds that provide exposure to global markets while being dirham-denominated, thereby offering more stability.
For instance, unit-linked insurance plans serve a dual purpose by offering both life cover and long-term market-linked returns. Mutual funds designed for non-resident Indians can also provide diversification without the currency conversion costs associated with sending money to India.
Residents often overlook just how much exchange rates affect their financial future. While the dirham is pegged to the dollar, the rupee is prone to fluctuations. This means that, while an investment in India might show an 8 per cent to 10 per cent return on paper, the actual gains could be 5 per cent to 6 per cent lower when adjusted for currency depreciation and conversion costs.
A smarter approach is to allocate a good portion of savings in dirham-based assets, ensuring a more predictable financial future.
The UAE’s investment landscape is dynamic and with that comes a fair share of high-risk opportunities. Cryptocurrencies, high-risk stocks and speculative investment schemes often promise exponential returns, luring residents eager to grow their money fast.
But history has shown that markets can be unforgiving. While these investments have their place, they should only form a small part of a well-rounded portfolio, balanced by stable, income-generating assets.
Long-term financial security
Another point to note is that investment planning isn’t just about growth, it’s also about security. Many of us either neglect insurance entirely or buy policies based on immediate affordability rather than long-term adequacy.
Life insurance, critical illness coverage and income protection are essential to protecting financial well-being. A well-planned insurance strategy ensures that unexpected issues such as poor health or job loss don’t derail carefully built wealth.
Avoiding these common pitfalls isn’t about drastic changes, it’s about being conscious about money. Diversifying investments, staying mindful of currency fluctuations and leveraging the financial opportunities available in the UAE can have a significant impact.
Seeking guidance from financial advisers, keeping an eye on global market trends and taking a long-term approach can help Indian residents to maximise their wealth while avoiding unnecessary risks.
At the end of the day, financial success is more about how wisely you invest and protect what you have.
Atul Kathuria is business head of term life insurance at Policybazaar.ae
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
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Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
The specs: 2018 Renault Koleos
Price, base: From Dh77,900
Engine: 2.5L, in-line four-cylinder
Transmission: Continuously variable transmission
Power: 170hp @ 6,000rpm
Torque: 233Nm @ 4,000rpm
Fuel economy, combined: 8.3L / 100km
UAE currency: the story behind the money in your pockets
UAE v United States, T20 International Series
Both matches at ICC Academy, Dubai. Admission is free.
1st match: Friday, 2pm
2nd match: Saturday, 2pm
UAE squad: Mohammed Naveed (captain), Rohan Mustafa, Ashfaq Ahmed, Shaiman Anwar, Rameez Shahzad, Amjad Gul, CP Rizwan, Mohammed Boota, Abdul Shakoor, Ahmed Raza, Imran Haider, Sultan Ahmed, Zahoor Khan, Amir Hayat
USA squad: Saurabh Netravalkar (captain), Jaskaran Malhotra, Elmore Hutchinson, Aaron Jones, Nosthush Kenjige, Ali Khan, Jannisar Khan, Xavier Marshall, Monank Patel, Timil Patel, Roy Silva, Jessy Singh, Steven Taylor, Hayden Walsh
Mohammed bin Zayed Majlis
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MAIN CARD
Bantamweight 56.4kg
Abrorbek Madiminbekov v Mehdi El Jamari
Super heavyweight 94 kg
Adnan Mohammad v Mohammed Ajaraam
Lightweight 60kg
Zakaria Eljamari v Faridoon Alik Zai
Light heavyweight 81.4kg
Mahmood Amin v Taha Marrouni
Light welterweight 64.5kg
Siyovush Gulmamadov v Nouredine Samir
Light heavyweight 81.4kg
Ilyass Habibali v Haroun Baka
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The biog
Favourite food: Tabbouleh, greek salad and sushi
Favourite TV show: That 70s Show
Favourite animal: Ferrets, they are smart, sensitive, playful and loving
Favourite holiday destination: Seychelles, my resolution for 2020 is to visit as many spiritual retreats and animal shelters across the world as I can
Name of first pet: Eddy, a Persian cat that showed up at our home
Favourite dog breed: I love them all - if I had to pick Yorkshire terrier for small dogs and St Bernard's for big
Killing of Qassem Suleimani
The years Ramadan fell in May
More on Quran memorisation:
