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5 Simple Ways to Start Investing in 2024

If you understand the time value of money, you know that AED 1,000 today is more valuable than AED 1,000 five years from now. This is because you can invest what you have now and let it gain interest over time.

Time adds value to money or, to be more precise, it allows you to earn interest on it and grow its value. Indeed, we all should have thought about how to start investing and put some money into investment saving schemes when we were younger.

Years ago would have been the perfect time to invest. However, all is not lost because today is the next best time to invest. This brings us to our first tip on how to start investing for beginners.

1. Start Today

If you can have only one takeaway from this guide, make it this: The earlier you start investing, the better, so start investing today. Investing now will lead to the highest possible future value for your money.

As a case in point, if you invested USD 1,000 (AED 3,673) into Amazon in 2003, Kiplinger says it is worth USD 52,000 (AED 190,996) today. In fact, it was worth USD 70,000 in July 2021, so you could have sold it then and made USD 69,000 off your money (not accounting for inflation, of course).

Here’s something even more startling. If you invested USD 1,000 in 1997 during Amazon’s initial public offering (IPO), CNBC calculates your investment would have been worth USD 1,341,000 in August 2018. Your USD 1,000 investment would have worked so hard for you it would enable you to retire after 21 years.

2. Invest as Much as You Can

The more you invest now, the greater the future value you can generate. Using the example above, if you had invested USD 2,000 instead of USD 1,000 into Amazon on its IPO, you could have sold your Amazon stocks in 2018 for more than USD 2.6 million.

How do you calculate how much to invest?

  • Start by calculating your monthly income. That includes your salary, business income, and other income sources.
  • Next, calculate how much your monthly recurring expenses are. This includes your rent, utilities, transportation, food, mortgage amortization, insurance premiums, and other regularly occurring payments.
  • Now take what remains of your monthly income and allocate it across three buckets: savings, investment and discretionary fund. You can split it this way: 40% on savings, 40% on investment, and 20% to do with as you please.

You can increase the share that goes into your savings to build an emergency fund. If you have enough saved, you can increase the amount you invest.

It is up to you how much of your remaining income you will save, invest and use on wants and luxuries. Just remember, if the best way to invest money is to start early, the best way to maximise the future value of your investment is to invest as much as you can.

A note on emergency funds: Your emergency fund is intended for unexpected expenses. It must be enough to cover your living expenses for at least six months to keep you afloat in case of unemployment. It should also adequately cover unforeseen expenditures like medical care, laptop replacement, home repair, etc. To minimise the money you need to set aside for emergencies, you can get involuntary loss of employment, medical, and home repair insurance.

3. Assess Your Risk Appetite

How much money are you willing to lose? More importantly, how much money can you afford to lose?

Your answers will help you determine your risk appetite. Investments, unlike savings, do not guarantee returns. In other words, you can lose money you invest.

Remember our example earlier? A thousand dollars’ worth of Amazon stocks bought in 2003 was worth USD 70,000 in 2021 but only USD52,000 in 2023. It’s still a win in the long term but a loss in the short run. If you bought Amazon stocks after the 2021 peak, the dip in stock prices in the period since then means you would have lost some money.

Risk varies across financial instruments; the higher the risk, the higher the potential returns. Equities are high risk, high return, and are for people with an aggressive risk profile. Bonds carry moderate risks and returns, although some high-yield bonds (i.e., junk bonds) come with higher interest rates and greater risks.

If you have a low tolerance for risk, you can opt for money market funds and time investments. Savings bonds are also an excellent low-risk investment option.

You can actually purchase National Bonds through Al Ansari Exchange. You can earn PLUS Rewards loyalty points with every transaction. Your savings bond deposit will also qualify you for the National Bonds AED 35M Rewards Program, which awards AED 1,000,000 to two winners every quarter, among many prizes.

4. Invest Regularly

Decide on an investment frequency and set a minimum amount of money to invest. Suppose you have decided to invest AED 2,000 every 20th of the month. Make sure to stick to that schedule. You can go beyond AED 2,000 but do not go under that amount.

Setting an investment schedule will keep you accountable and help enforce your commitment to invest. Its dollar-cost averaging benefit can also minimise the impact of economic downturns.

5. Diversify

Invest in different types of instruments. Your options include stocks, bonds, mutual funds, exchange-traded funds (ETFs), treasury bills (T-bills), mortgage-backed securities, fixed-income futures, stock options, real estate, real estate investment trusts (REITs), and many more.

You can diversify not only your financial instruments but also your industries and types of companies. You can invest in e-commerce platforms, oil and gas companies, startups, etc.

Diversification helps reduce your risks. Your real estate property can continue to appreciate amid stock market downturns. If oil and gas prices crash, your investment in e-commerce may continue to rise in value.

How to Invest Money

Ready to watch your money grow and achieve your financial goals? Investing does not have to be complicated. Even small steps can make a big difference. Use the money you have that you can spare now and open a savings bond account. Even seasoned investors had to start somewhere; they were once beginners like you, looking for investing ideas and consuming guides on how to start investing.

Remember, responsible investing is key. Do your research and understand your risk appetite before diving in.

You can start your personal investment journey with Al Ansari Exchange.

Contact us to know more about our National Bonds investment scheme now.

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How to Start Investing in 2024