5 Secrets to Investment Success

Here are 5 secrets that I have learned over the last 35 years of managing money professionally.

Take An Active Interest: the person with the greatest vested interest in your financial well-being is you. You owe it to yourself to take an active interest in what is happening with your money and why. Building financial knowledge over time increases the threshold at which you need to call in a professional. You will be able to manage straightforward matters yourself and understand if what the professional is telling you makes sense. This could potentially save you thousands over a lifetime and avoid expensive mistakes.

We’re Not In Kansas Anymore: Many expats assume regulation of financial services in the UAE is the same as at home. It is not. The international financial services market is euphemistically termed as “lightly” regulated. For this reason, if nothing else, you should only invest in what you understand. You should undertake independent research to verify the bona fides of the recommended company, product, and adviser. Never make a cheque for investment out to the adviser or their firm. Take time to invest in financial education. The better informed you are the better the outcome should be.

Understand Risk: in normal life, most people try to avoid risk. When it comes to investment, there is no such thing as a risk-free investment. But this is a good thing. Risk is the measure by which the supply of capital is priced. Investors seek the highest return for their capital and borrowers seek the lowest price for borrowing the capital. The market of capital owners and borrowers determines the market price. There are many types of risk. Volatility is a measure of how much the price of an asset goes up and down. So equities (shares) would have a higher degree of volatility than real estate. However, volatility fails to consider many aspects of risk, for example, you can convert equities into cash much faster than real estate. This may be important if you need cash quickly.

Future Proof Your Investment. Financial services is a competitive and evolving sector. While you are investing for the long term, you are unlikely to be best served by keeping the same product for 40 years. The product you have today may be the best on the market, but in years to come it may not have the features you need so you may need to switch to a new one. Make sure you “future-proof” your investment by only opting for products that have no exit penalties. If your existing arrangement does not provide you with this flexibility, research alternatives. Good companies should not have to hold you hostage to keep your business.

Review Regularly…but not too often: If you look at your investment too often, you’ll be tempted to tinker with it, this rarely results in the best outcome. Review and rebalance once a year, and try to avoid being influenced by all of the market noise that the news feverishly reports or that “hot tip” your friends are all investing in. Getting rich is a slow process that rewards patience.

Bonus Tip: Only Pay For What You Need: Before engaging with a professional, ask what services they provide and how their charges are structured. If all the services are packaged together, will you need all of them or might you be over-paying for those you do need?