Investing for your retirement is one of the smartest decisions you'll ever make! This guide will teach you how to do exactly that.
Ever since the beginning of their financial journeys with the start of their earnings, young earners automatically enter the personal finance ecosystem. To ensure their financial well-being in the run, they are required to take various decisions, exercise financial discipline, and set goals for their future self.
Amidst all this, a considerable dilemma faced by young adults is to choose between investing and buying insurance, whether health or life. This choice is further affected by factors like the old age of the parents of the policyholder, their family, and other such factors.
If one considers investing the fuelling of a vehicle, insurance can be thought of as carrying a repair or first aid kit before embarking on the journey. And while investing and insurance are vital aspects of personal finance, what you should prioritise as per your profile and economic conditions is discussed in the article below.
UAE nationals and residents have an array of investment options in UAE as well as the security of investment, given the laws regarding finance implemented in the country. You can invest in stock exchange trading, private pension schemes, real estate purchases, deposit accounts, and several other investment tools as per your risk profile and grow your wealth.
Here are some of the options that you can explore based on your risk appetite:
Mutual funds are among the renowned investment instruments. Here, a company collects funds from investors and invests them in bonds, stocks, and other investment options to form a portfolio. With mutual funds, the investor earns profits as the value of the overall portfolio goes up.
There are two ways through which you can buy mutual funds:
A Systematic investment plan (SIP) is an excellent way to manage and grow money in the market over a long period. It allows investors to invest small amounts periodically instead of going with a lump sum amount in one go. Under an SIP, users invest a specified amount at pre-specified intervals. Generally, the longer the investing period, the higher the returns with mutual funds due to the compounding effect.
Various leading financial institutions in the UAE deal with mutual funds of which you can check out the plans and select the one that aligns with your requirements.
Some of the popular banks offering mutual funds at reasonable rates are –
Benefits of Mutual Funds
The following are some of the primary benefits of investing through sip investment plans:
National bonds are one of the safest investment instruments, where you can start investments at as low as AED 100. Apart from post offices in the UAE, you can purchase national bonds from any of the National Bonds Corporation outlets as well. One can also buy these bonds online, with the UAE Government allowing the online purchase of bonds via the official National Bonds website.
Both UAE residents as well as non-residents can buy national bonds and invest their money.
The bond offerings are divided into four categories:
Some of the best finance products of nationals bonds for millennials are discussed below:
Here are the primary benefits of National Bonds –
With the UAE being a rapidly growing economy, the value of properties is expected to be on the rise for some time. Investing in real estate has numerous benefits associated like excellent returns, tax benefits, and more.
Discussed below are the top benefits that make real estate investment a stand-out option –
Cryptocurrencies are digital currencies, although without being backed by tangible or real assets securities. The Central Bank of UAE has not licensed cryptocurrencies as legal tender. Investors in the UAE have to involve banks or other third-party intermediaries to fund trades outside the UAE.
You can buy cryptocurrency in UAE in the following ways:
Some of the advantages of investing in cryptocurrencies are as follows –
Investing in the stock market is a rather straightforward and quick process. You can buy stocks or shares in the UAE by following these steps –
Here are the key benefits of investing in stocks –
Investment, as discussed earlier, is key to growing your wealth over time. However, even with adequate investments, an individual’s savings can be completely exhausted with just one adversity like a critical disease, the demise of a family’s earning member, and more.
Following the earlier analogy of car fuel and car repair kit, securing your savings and investment against depletion due to unforeseen circumstances is equally necessary as growing them over time. This can be easily done with an insurance plan, which not only assists you and your family at the need of the hour but also ensures that you don’t have to delve into your savings in case of an emergency. Consequently, insurance also constitutes a crucial part of financial planning.
You can start optimum financial planning by getting life insurance, health insurance, and unit-linked insurance products if you are a young earner. Let’s discuss in brief the essential aspects of each of the products.
While COVID-19 has increased the uncertainty regarding pandemics and illnesses, the drastic shift in lifestyles has also increased the prevalence of various health disorders, irrespective of age and gender. This, combined with the high health care costs, makes health insurance crucial for your health as well as finances.
With a health insurance plan, you can get covered for medical treatment expenses, emergency hospitalisations, and more. Moreover, with add-ons, you can easily customise the policy per your healthcare needs.
Here are the top reasons to buy health insurance at an early age:
Life insurance is perceived as an investment that comes with many advantages. While several factors determine the premium for a life insurance policy, age again plays a significant role, highlighting the importance of purchasing an insurance policy as early as possible.
Life insurance provides financial protection to the family of the insured person in case they pass away during the tenure of the plan.
Mentioned below are the key benefits of opting life insurance plan at an early stage of life -
Unit-linked insurance products represent a combination of both insurance and investment. In these insurance plans, one portion of the ULIP premiums is used for life insurance coverage, while the other portion goes towards investment. These plans are best suited for individuals who prefer long-term investment plans while also requiring insurance coverage.
Investing in ULIPs is beneficial as you can start ULIPs at any age. At the same time, it must be kept in mind that ULIP investment is subject to market risks that have to be borne by policyholders based on their investment choice.
Listed below are the key benefits of ULIPs –
Looking at the advantages of investment and insurance at an early age, it is best to go for the investment and insurance simultaneously, as both have unique benefits that cannot be prioritised, combined, or replaced.
While investment offers purchasing power in future to meet financial goals, insurance covers your investment, savings, and your family and prevents the exhaustion of savings and investment. For this reason, insurance and investment are the two critical pillars of financial security.
In the modern era of uncertainties, protecting yourself and your family is pertinent. Though both investment and insurance are necessary, several people may not have sufficient funds for allocation towards both. In such instances, it is advisable not to prioritise one over the other and allocate funds towards both, even if the allocated funds are low. This can be a good starting point – you can increase the contribution following the growth of your income.