So you’re trying to make the most of the money you’re earning in the UAE. Let’s say you have AED 100,000 – 200,000. It’s not an insignificant amount of money for most, but neither is it enough to attract the interest and assistance of a private banker or financial adviser (at least one who’s in it for more than a quick buck).

What are your options for putting this money to work in a risk-appropriate manner?

Let me start by saying that whenever you’re investing, you should have clear answers to the following questions:

  • When do I need the money back?
  • Does this investment keep my assets diversified (in terms of liquidity, geography, risk levels)?
  • How much risk and what kind of risk am I willing to take?

We can’t address all these questions now but a quick word on the last one.

Most people mistakenly think that risk is only about the possibility of losing your original capital. In the financial world, risk is often defined as volatility. There are still other risks such as purchasing power risk (your return is below the rate of inflation and so in terms of what you’re able to buy with your money, you’re actually losing money), not to mention geopolitical, currency, issuer solvency, liquidity, interest rate, regulatory, etc.

I’d like to focus on the risk that matters most in terms of your future wellbeing – the risk that the return you achieve will not be sufficient to fund your future goals and lifestyle. So let’s look at your investment options in terms of return potential.

1% return pa – savings account (the safe option)

If you’re simply trying to preserve capital and not take any losses (perhaps because you need your money back in 18 months or less), then you’re looking at your typical bank term deposit account or savings account. These won’t get you much, maybe 1.0 percent per annum, but that’s okay if you’re just trying to protect your capital.

2-3% return pa – National Bonds

Perhaps you’re targeting a two to three percent per annum return. Then you’re looking at something like UAE National Bonds. Your actual return will depend on how much you invest, how long you hold the bonds and how often you buy them, but in 2013, bondholders earned on average, 2.89 percent according to their website. National Bonds can be purchased at Emirates Post offices, local banks and directly online.

4-6% return pa – government/ corporate bonds

Someone needing a four to six percent per annum return should be looking at buying government bonds or investment-grade corporate bonds. The return on bonds depends on whether you buy the bond below, at or above the par value and the yield (interest paid either as a nominal coupon rate or the yield to maturity). With bonds, you need to be thinking about the risks of issuer credit quality, currency and especially interest rate risk. Bonds are best bought through an experienced broker who is willing to help you think through your parameters and find you the right bonds.

If you want to buy individual bonds or stocks in the UAE, you can find a list of brokers here. Make sure you do your due diligence on the broker.

6-9% return pa – corporate bonds, stocks, stock indices

If you’re targeting returns from six to nine percent per annum should be buying high-yield corporate bonds, stocks or stock indices (via exchange traded funds or index funds) in developed markets (Europe, US, Australia, etc.). A place to do this inexpensively is via retail investment platforms such as or [Related: What are bonds? How are they different to stocks?]

Higher – 10% pa return or more – emerging stocks

Investors who can stomach volatility in pursuit of higher returns should be buying stocks in developed small/micro cap, emerging or frontier market stocks. If you buy these as an asset class via exchange traded funds, you might average 10 – 14 percent per annum. But if you buy individual shares, the return could be 20 percent per annum or more. The Dubai stock market was up 94 percent in 2013 and in 2008, the UAE market as a whole was down 72 percent. Someone grab the antacids.

At the end of the day, answer the three key questions above, choose a strategy, implement it and stick to it. Don’t let emotions or what your friends are doing drive your decisions because they’re usually going to lead you to the wrong decisions for your specific circumstances.

Even higher – angel investment

If you are an entrepreneur at heart but have commitments in life that do not allow you to start up your own business, one of the ways to get a very high return is to invest in a start-up. Considering that over 80 percent of start-ups fail in their first three years, it is a risky investment. As an angel investor, you need to be convinced that by the founder’s vision and that they can take their business forward and give you the return you expect. It is always  a good idea to do proper due diligence on any of the start-ups you consider investing in.

Vince Truong, CFP, is a Partner at Holborn Assets LLC. He is a rare fee-based asset manager and the only US Certified Financial Planner in the UAE. He writes a blog at CEO Ambareen Musa further discussed this topic on Dubai Eye’s radio show, The Word with Jason Lumber and Zahra Soar. Here is what the listeners of The Word had to say on investing AED 100,000.

“Banks in Egypt offer a 10% interest rate on three year fixed term deposits on Egyptian Pound.” – Hesham

“In India fixed deposit is nine per cent .” – Varun

“My rent comes out in one cheque so I’d use the money to pay that!”

“How is National Bonds sharia compliant if interest is involved.” – Nad

“National Bonds are not guaranteed.”

“Invest in a MBA.” – Wayne

“How do I buy shares in UAE companies?” – Don

“Invest in ENBD MENA top companies fund!” – Wayne