As an expat, you must have experienced firsthand the benefits of earning tax-free income in the UAE. What you may not know is that you can also invest and earn capital gains tax-free.
Some of the best investments in the UAE for expats include local stocks and ETFs, foreign stocks and ETFs, local and foreign real estate, precious metals, cryptocurrencies, local and foreign fixed-income securities, local and foreign mutual funds, and robo investing.
However, to succeed, there are certain investment tips you must pay attention to. We consider five of the most important ones below.
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1.Prioritize liquid investments
If you plan to leave the UAE at some point, prioritize liquid investments that you won’t have trouble liquidating (if you choose to do so).
Consider real estate, for example. They are usually illiquid, and it may take time to find a buyer. Even when you do find a buyer, the process of closing the deal might take time.
While you are waiting, the price of the property may have fallen. This is why most people who are in a hurry to liquidate their properties have to sell at a discount.
If you don’t want to be in this position, you may be better off with Real Estate Investment Trusts (REITs). These are stocks of real estate and mortgage financing companies that are traded on the stock exchange market like any other stock.
You can easily buy and sell REITs in a few seconds or minutes, without the fear of changing prices.
2.Seek foreign exposure
Even while you are in the UAE, you should seek exposure to foreign assets, especially those listed in the US. It is no news that the US is the most prosperous nation in the world and that most of the biggest companies in the world are listed on its stock exchanges (Apple, Amazon, NVIDIA, etc.).
While the UAE, as an emerging economy, can provide high returns, the long-term stability and growth of developed markets like the US cannot be overlooked.
3.Diversify your portfolio across asset classes
It’s best to have a diversified portfolio that includes multiple asset classes.
For example, stocks and crypto can provide high risk-adjusted returns, while bonds and gold can act as safe haven during economic downturns. Dividend stocks and REITs can also provide regular income.
Such a diversified portfolio can maximize your risk-adjusted returns.
4.Invest consistently
The best way to make maximum use of the tax-free investing provided by the UAE is to build up a large portfolio. And the best way to build up a large portfolio is to invest consistently.
If you are a monthly income earner, ensure you commit to investing at least 20% of your income in the financial markets every month. Consistent investing helps you derive maximum value from compounding, which Albert Einstein called the eighth wonder of the world.
5.Choose an investment strategy that fits
If you don’t have the time or skills to research individual assets, you can choose to be a passive investor. This involves registering with a managed investment platform that will create a personalized, diversified portfolio for you based on your time horizon, investment goals, and risk tolerance.
On the other hand, if you have the interest, time, and skills, you can choose to create your portfolio by selecting the assets to buy and allocating your funds to them in a way that matches your time horizon, investment goals, and risk tolerance.
In the UAE, a company like Sarwa allows you to do both. You can subscribe to their managed investment platform or create your own portfolio through their trading app, which provides access to stocks, ETFs, and cryptocurrencies, among others.
