How retail investing offers path to financial freedom

The National

19-02-2025

If you want to control your financial destiny, retail investment has become an increasingly sought-after option. It's not just the ultra-wealthy who are active in monetisable markets any more and the numbers reinforce this shift. The combined market capitalisation of the Dubai and Abu Dhabi stock exchanges surpassed Dh3.91 trillion ($1.06 trillion) in 2024, compared with Dh3.65 trillion in the year prior, according to state news agency Wam. This highlights how more people are generating wealth today. UAE residents are seeking digital investment platforms to diversify their portfolios. Technology has simplified investing, with online brokerage platforms offering low-cost or commission-free trading. It is imperative to understand how to harness this new investment age. Like anything in life, it all starts with the basics. To start investing, begin by deciding what you want to invest in. This can include stocks, bonds, real estate or mutual funds (among several other options), without relying on big companies to handle your money. This DIY approach grants more control over where you spend your money but also means that you need to evaluate your risk profile and conduct due diligence. UAE residents' investment choices are as diverse as the expatriates who make up the country's population. Yet, most of these individuals prioritise real estate and gold. Why? Because these assets maintain their value and stability throughout history. Consider Dubai's real estate market, it recorded Dh522.5 billion worth of deals in 2024. People renting property in key areas can expect to earn between 7 per cent and 9 per cent of its value each year. Meanwhile, more people are putting money into index funds and exchange-traded funds (ETFs) for wealth growth over time without paying high fees – but there are more options to consider. Green energy and technology start-ups, for example, are something new to try as these industries hold promising futures. With sustainability and technology at the forefront of today's global policy shifts, they are strong starting points – especially for new investors. However, a solid base is essential before diving in. An emergency fund covering three to six months of expenses provides a safety net for responsible investing. Achieving financial independence through retail investment starts with informed decisions: begin small. Low-cost index funds offer diversification and low fees, making them a great entry point. Due to their long-term stability and reduced risk when compared to speculative trading, these instruments are becoming increasingly popular among UAE retail investors. You can mimic the diversification strategies of high-net-worth individuals and ultra-high-net-worth individuals by expanding your portfolio across asset classes such as real estate, private equity and alternative investments. Investing does not follow a single approach. Each investor's risk appetite depends on things such as how much they earn, what they want to do with their money and what's going on in their life. Consider Warren Buffett, who takes a long-term, value-investing approach, compared to Elon Musk, who embraces high-risk, high-reward ventures in emerging industries. They are examples of polar opposite strategies, yet both achieved incredible success. Similarly, people who don't mind taking big risks might opt for stocks or less common investments, while those wanting it safe might stick to bonds or funds that pay regular dividends. What's happening in the market in 2025 should also guide how you invest. Big changes in the world economy, such as inflation and geopolitical tensions, are affecting how investments perform everywhere. What's most appealing about investing is the possibility of achieving financial freedom. Saving regularly, investing consistently and remaining patient present the opportunity to use compound interest to build wealth over time. This is especially true in the UAE where there is no income tax. With increased recognition for helping facilitate smarter financial decisions, retail investment is playing an important role in residents' money-making strategies. It provides you with endless opportunities: from fulfilling retirement goals to building wealth for your future generations. While investing is a promising path to financial independence, true financial freedom requires a multi-asset approach. Saving, budgeting and diversifying income streams in a disciplined manner will yield long-term benefits. Investing can be overwhelming, especially for those who are new to the playing field. If you fit into this category, reaching out to informed financial advisers to guide you will help ease that burden. Nonetheless, if you're embarking on an investing journey, the key to success is starting small, staying informed and remaining patient. Bas Kooijman is chief executive and asset manager of DHF Capital, a securitisation company for financial services