We are a young couple that lives and works in the UAE. We have a stable income that allows us to build wealth, and this is our goal: we intend to invest the money that would otherwise be wasted. Our risk tolerance is moderate: we realize that investment is associated with uncertainty, and we are willing to increase our wealth at a faster rate, but we are not ready to take high risks. We are going to make informed decisions, and we will expect about 5-6% annual income.
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Our income is expected to rise; in particular, the husband has remarkable career growth perspectives. We are willing to invest the saved sum of 22,000 AED. Apart from that, taking into account all the expenses (that admittedly include unnecessary ones), we are currently willing to invest from 1,000 to 2,000 AED every month. We realize that our economic position can change, but as it has been pointed out, part of our expenses are not a necessity and can be reduced.
According to the UN, the current economic situation in the world can be described as a sluggish recovery from the recession of 2008-2009; besides, the current geopolitical tensions are not favorable for the restoration of the global economy (“World Economic Situation and Prospects 2015” 1-10). For oil-exporting countries, the plunge in the oil prices can be described as a catastrophe, but the situation of the UAE is different (Hanware par. 7-12). The government of the UAE has been diversifying the economy of the country, and as a result, only a quarter of its GDP now depends on the oil export (“United Arab Emirates” par. 5).
This factor makes the UAE less dependent on oil, although the prices plunge is, naturally, not beneficial for its economy. Apart from that, the upcoming Expo2020 is an event that will have a significant positive impact on the economy of the country as it creates job places and improves the infrastructure of Dubai (Churchill par. 6). To sum up, the economic situation in the world and the UAE is not at its best, but it is recovering, and there are significant positive trends. It is also noteworthy that the investment policies of the UAE are extremely attractive for both local and foreign investors, and that the country is especially protective of the former (Maceda par. 1-2; “2013 Investment Climate Statement – United Arab Emirates” par. 1-3).
Given the investment-favorable climate of the UAE, we would like to invest 60-70% of our assets in the UAE securities. With respect to bonds and stocks, the portfolio is going to correspond to the moderate risk tolerance of the investors. About half of the assets (50-55%) will be allocated to stocks as they are characterized by higher risks and profit; the rest will be invested in bonds to ensure a greater level of security. At least 10% will be allocated to international stocks, but the largest part (35-45%) will be invested in the UAE stocks. 20% will be invested in international bonds, and 25-30% will be allocated to the UAE ones. The preferred maturity of the bonds is moderate, which would balance out the risks and interest rate and is in line with the character of the portfolio.
With respect to investment planning, it is especially important to study the history of various opportunities. Also, we are going to make the portfolio as diverse as it will be logical, which is characteristic of moderate investments (Kandziolka 88).
In our case, the wealth accumulation process is concerned with benchmarks rather than goals. A reasonable benchmark for moderate investment is the Standard & Poor’s 500 Index, and it is going to be chosen to evaluate the performance of our portfolio (Kandziolka 88; Baker and Filbeck 706).
“2013 Investment Climate Statement – United Arab Emirates.” US Department of State. The Office of Website Management, Bureau of Public Affairs, 2013. Web.
Baker, H. Kent, and Greg Filbeck. Portfolio Theory and Management. New York: Oxford University Press, 2013. Print.
Churchill, Neil. “Expo 2020 Win: Impact On Dubai’s Jobs Market.” Gulf Business, 2015. Web.
Hanware, Khalil. “Falling oil prices trigger stocks sell-off in Gulf.” Arab News, 2015. Web.
Kandziolka, Charles. Personal Wealth Management And Retirement. Raleigh: Lulu Press, 2012. Print.
Maceda, Cleofe. “Dubai, Abu Dhabi Strong Policies Lure Investors, Experts Say.” Gulf News, 2013. Web.
“United Arab Emirates.” CIA. CIA, 2015. Web.
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“World Economic Situation and Prospects 2015.” UN World Economic Situation Report. UN, 2015. Web.