The Ultimate Guide to Investing in Dubai

Property in Business-Bay

Over the years Dubai has emerged as one of the fastest growing cities in the world. Once a distant and remote city in the Middle East, Dubai has now evolved as one of the most sought-after luxury tourist destinations and a promising venue for international trade and business which makes it the best place to invest money right now, but the question remains what is the best way to invest money in Dubai? Today, people around the world are shifting their base to Dubai because it provides incredible lifestyle and a cosmopolitan environment to individuals. Moreover, Dubai is one of the safest cities in the world. Thanks to the empowering government and its exemplary law and order.

The city is a home to people from more than 200 nationalities belonging to different sectors and industries which, in itself, is a testament to Dubai’s diversity. People around the world have been looking at Dubai as a land of opportunity because of the financial stability and lucrative lifestyle it provides compared to any other city in the world.

With better standards of living and relatively relaxed tax norms, people here have a higher spending capacity than those in other countries and subsequently look for best ways to invest money in Dubai. The city has attracted the investors around the world to be a part of its growth for years and continues to do so.

Well renowned for its ever-growing economy, Dubai provides abundance of investment options for everyone from short to long term and low to high involvement depending on what the investor is looking for.

Why Should You Invest Money in Dubai

High Return on Investment

Termed as a hybrid city by the American firm JLL, Dubai has redefined luxury through its hospitality and real estate and stands right in between the world’s ‘emerging cities’ and ‘new world cities’. Dubai has also ranked high in Economic Intelligence Unit’s Global Liveability Ranking and EIU has termed it as one of the best cities to live in the MEA region

All investors, especially real estate investors, yield much higher returns on rents compared to any other property market. This holds true even today after a considerable slowdown of the market under the pandemic effect.

Growing Business Opportunities

Being a hub of international trade, Dubai claims a spot on the list of Top 20 Cities in the world as per Global Power Index 2020 (GPCI). Attracting businesses from all around the world, the city stands as strong trade centre for Asia, Africa and Europe.

The highly progressive mindset of Dubai’s leaders offers a convenient and promising framework for businesses to nurture and grow within a free enterprise system. Business leaders view Dubai as a land of opportunities where tremendous growth is predicted in the coming years. Events like Expo 2020 are affirmative evidence of Dubai’s commitment to economic growth. Investing aggressively in this growing market will surely yield rewards.

Minimal Taxes on Gains

One of the top reasons to invest your money in Dubai is the relaxed tax environment. Dubai’s government does not impose taxes on interest earned from investments. There is no tax on capital gains for individuals nor is your dividend income taxed in the UAE unlike any other country.

There is little or no tax imposed on capital gains earned from investment in UAE. Only real estate investors might end up paying municipal property tax. However, the tax rates do not exceed 5% in most cases which is negligible compared to other parts of the world.

Dubai also ensures uncompromised lifestyle and freedom for everyone and treats all classes equally. The emirate of Dubai has strong international connections and world class infrastructure. People around the world are looking forward to investing their money in Dubai considering the profitable future.

7 Best Ways to Invest Your Money in Dubai

1.      Real Estate

Considered by many as the epitome of prolific lifestyle, Dubai offers best in class homes, hotels, offices and lot more. Following the new law passed by the government, Dubai is now an ultimate haven for real estate investment. People around the world are allowed to own a property in the UAE. This has opened an opportunity for many expats aspiring to invest in the most promising, trusted, rewarding and arguably safest investing avenue i.e. real estate.

Foreign ownership is permitted in designated freehold areas in Dubai. Foreigners staying outside UAE and expatriate residents can acquire complete freehold ownership rights over property without any restrictions. However, investors can also enjoy usufruct rights, or leasehold rights for a property for up to 99 years. This gives you the temporary rights to legally use or generate benefit from someone else’s property. This can indeed prove to be one of your best passive income investments.

Apart from this, Expo 2020 is expected to have a huge impact on most of the sectors in Dubai, which puts real estate at the forefront. By keeping a track of overtime developments and growing population of the city, real estate is potentially the best way to invest your money in Dubai and to make a good return on investment.  

Things to Consider While Investing in Real Estate

Property Valuation

Property valuation is one of the most critical aspects to consider before investing in real estate as it helps mitigate existing or potential risks surrounding buying a property. It ensures that the investor is paying the right price, promotes transparency between the buyer and seller and plays an important role in securing mortgage.

Property Location

Location is considered as the king of real estate investment. It plays a critical role in determining the profitability of your investment. Proximity to amenities like market, school, clinics or metro stations and considerable connectivity make it easier for you to sell or rent your property in future for monetary benefit. Some prominent locations in Dubai include Business Bay, Dubai Marina, Barsha Heights, JVC, etc.

Purpose of Investment

Considering the fact that real estate offers low liquidity on high investment deals, you can’t afford to not have a clear investment purpose. Investors needs to have complete clarity on their intent — whether they want the property for personal use, periodic gains through rent or lease or to sale for good in short or long term.

How to Invest in Real Estate

With the right mind-set and thought process, investing in real estate is quite easy. All you have to do is choose an experienced and reputed developer such as DAMAC Properties which has redefined the luxury real estate market by delivering premium and ultramodern residential, commercial, as well as leisure properties for two decades. Till date, DAMAC has already delivered 36,400 homes while 29,000 new homes are under way. Equipped with experience, quality craftsmanship and uncompromised customer service, the efficient team here will help you with the most suitable and viable real estate investment options that meet your aspirations.

Pros and Cons of Real Estate Investment

  • Value appreciation over time
  • Steady cash flow
  • Power of leverage
  • Helps build equity
  • Financial stability and control
  • Hedge against inflation
  • High capital involvement to be facilitated through mortgage
  • Incurs maintenance cost

2.      Stocks

Investing in stocks is an obvious option when considering capital investment. By investing in stocks, individuals trade in equity of various companies which allows them to own a portion of the company’s capital.

The stock market has turned out to be the smartest way of investing money for investors who have a solid understanding of companies’ performance. Thorough research, a dedicated mindset and a calculated risk appetite can earn you big bucks while investing in stocks. However, lack of research and understanding of market trends can incur huge losses. It is critical to familiarise yourself with the volatile equity market before jumping into stocks with your hard earned money as it might not be the safest way to invest money if you are not well versed in the fundamentals and goals of the companies you are investing in.

Dubai has two primary stock exchanges:

  1. Dubai Financial Market: Founded in 2000. The DFM is one of the three stock exchanges in the UAE. It is a Sharia compliant exchange and the first Stock Exchange to have its own Initial Public offering back in 2006. The DFM trades shares of companies in the UAE, Kuwait, Bahrain, Oman or other Gulf countries and it is regulated by the Securities and Commodities Authority (SCA).
  2. NASDAQ Dubai: NASDAQ is another stock exchange of Dubai. It enlists both domestic and international companies, irrespective of their market size. It offers trading in REITs (Real Estate Investment Trusts) and equity derivatives (futures and options trading). NASDAQ is regulated by the Dubai Financial Services Authority (DFSA).

Things to Consider While Investing in Stocks

Understand Your Investment Objective

Each individual has a dedicated investment goal. One needs to understand their financial goals and time they wish to stay invested for. Evaluate the time you will be able to dedicate for research and opt to be active or passive investor and enter the market with a focused goal.

Don’t Borrow to Invest in Stocks

One of the biggest mistakes you could possibly make is invest more than you can afford. Experts recommend that one should allocate a dedicated budget to park into stock investment and it should be surplus amount set apart from daily expenses.

Keep Emotions Aside

Never get attached to any particular stock. Investors have lost hefty amounts in stock markets due to lack of emotional control. It is crucial to stay away from greed or fear. Don’t get lured by abnormal returns from any unknown stock without understanding the risk involved. The stock market is highly volatile and one needs to stay patient to gain benefits in a long run.

How to Invest in Stocks

Investing in the stock market in Dubai is an easy process. Investors must open a trading account with a broker registered with one of the exchanges in Dubai i.e. Dubai Financial Market (DFM) or NASDAQ Dubai. The investor has to obtain an Investor Number to trade in the stock market.

After obtaining the Investor Number, you can open a trading account with a licensed broker and start trading in the stock market.

Pros and Cons of Stocks

  • Rapid growth with economy
  • Quick access to your funds
  • Keeps you ahead of inflation
  • Easy to buy and sell
  • Can invest with very limited funds
  • Volatile market with no guaranteed returns
  • Risk of losing all the capital
  • High brokerage rates

3. National Bonds

National Bonds is led by the Dubai bonds company and initiated by the Dubai government with 50% ownership. It offers a Sharia Compliant scheme for investing money, with a goal of providing low-risk savings to people in the UAE. Investing in National Bonds is one of the most preferred investment options for individuals looking for fixed income gains considering its safety, liquidity, and better interest rates than banks.

The holding period for bonds is three months, and you can redeem them across the counter via certain money exchanges. The minimum investment required for bonds is AED 100. You can get ten bonds valued at AED 10 each or a single bond worth AED 100. There is no cap for investment in bonds.

You can buy National Bonds online, Money exchanges, and banks. The minimum investment is AED 3000 and additional top-up in the denominations of AED 100.

How to Invest in Bonds

The most common place to find a bond will be the post office. However, there are more than 700 places across the UAE where you can purchase these bonds. Bonds can also be purchased online.

Pros and Cons of Investing in Bonds

  • Fixed returns of investment
  • Safe investment tool
  • Easy to choose as per ratings
  • Less volatile
  • Low liquidity
  • Prices fall when interest rate rise

4. Mutual Funds

Another money investment option is Mutual Funds. It is a go-to option for individuals who lack the skills and time to regularly evaluate stock market trends.

A mutual fund pools money from multiple investors and invests them in stocks, bonds, and other fixed-income securities under the direct supervision of a well-versed fund manager.

Mutual funds offer diversification as they invest in numerous companies from the money pulled in. Diversification of your investment portfolio offers a healthy balance between your risks and returns as your money is wisely invested in different sectors and industries.

There are mainly two types of mutual funds based on trade.

  1. Open Ended Funds – Investor can buy and sell funds throughout the year
  2. Close Ended Funds – Investor can only sell the purchased amount of funds on or after their maturity date.

Within these mutual funds, there is further classification based on their performance behaviour:

  1. Actively Managed Funds – These funds aim to outperform the market and they frequently keep buying and selling constituents of the fund. Actively managed funds are high risk but offer high returns and incur higher management fees.
  2. Passively Managed Funds – With the objective to match market performance, Passively Managed Funds focus on sustainable and slowly gaining capital returns. They don’t buy or sell the investments often, so they incur lower management fees as compared to actively managed funds.

If you are looking for options to invest money in Dubai, Mutual Funds are an attractive option.

Things to Consider While Investing in Mutual Funds

Check what is Right for You

Before choosing the right mutual fund, you need to assess your goals and risk tolerance. You may take a conservative approach if you want regular income while safeguarding your capital. However, if you are an aggressive investor and willing to take risks, then you can go for high risk and high return nature equity funds.  

Examine the Track Record of Mutual Fund

You must examine the track record of the mutual fund scheme you are looking to invest in. Financial experts advise to choose funds with large assets under management (AUM).

You must also check the investment style of the fund manager before putting money in a mutual fund. The manager should be totally unbiased and consistent irrespective of the market flow.

Don’t Expect the Same Returns Every Year

Investors largely consider mutual funds for annualised returns and you might think that you will get the same percentage of returns every year.

Some mutual fund schemes may give you +20% returns in the first year but may also come out with -5% in the subsequent year. Investors need to be ready to see such fluctuations in the returns from mutual funds.

How to Invest in Mutual Funds

Mutual funds can be bought under various options like lumpsum payments or monthly SIPs. All leading banks and financial institutions within the UAE deal in mutual fund investments. You may check out the plans offered by different organisations and choose one that suits you the most.

Pros and Cons of Mutual Funds

  • Easy and convenient investment option
  • Liquidity
  • In built diversification among sectors
  • Expert management
  • Profit reinvestment
  • Can invest with limited funds
  • Longer lock-in periods
  • Incurs management cost
  • Risk of poor trade execution

5.      Gold

Dubai is known as the land of gold. Many people here consider gold to be one of the best investments thanks to its outstanding resale value. The precious metal can be sold anytime to reap good financial profit. The gold market keeps fluctuating on a daily basis, so it is important to analyse the market before putting in your money.

Dubai has always been right in the centre of gold trading. Well renowned as the trade capital of the UAE, gold is sold on gold price, plus a making charge. This makes it stand out from the rest of the world where gold is sold per unit and making charges are added as a secondary charge. Making charges in Dubai are not calculated as a percentage of gold prices but is set as a flat rate.

Gold has long been considered as one of the safest investment options given its proven track record of providing hedge against inflation.

Things to Consider While Investing in Gold

Keep a Track of Market Price

Gold prices keep fluctuating just like stocks. It is always a good idea to check the market price. If you wish to invest in gold, enter the market when the prices are competitive.

Know the Type

As a gold investor, it is imperative for you to know the gold type. You should understand the karat and weight of gold. Gold is normally available in 18, 22 and 24 karats. The higher the karat, the more the purity.

Choose Wisely

Gold is available in many options like Collectible Gold, Gold Bars, Bullion Coins, etc. These are all physical forms of gold which will require a safe and secure place to store. However, you can also buy gold ETFs or bonds which substantially reduce the risk of the gold being stolen, but is not as quickly accessible as physical gold.

How to Invest in Gold

Gold can be purchased directly from the gold market or shops in Dubai. Gold stocks and ETFs can be purchased through a trusted broker in the region.

Pros & Cons of Gold

  • Easy to liquify
  • Hold a long term value
  • Universal demand
  • Provides hedge during inflation
  • Involves premiums and taxes
  • Requires physical storage
  • Lower return value compared to other investment tools

6.      Cryptocurrency

Probably the most discussed topic among your friends, family and colleagues these days would be about the exponential rise of Bitcoin, Ethereum and Cryptocurrency industry in general. Cryptocurrency is nothing but a medium of exchange just like normal currency but built digitally on binary data.

Unlike our normal tenders, cryptocurrencies are decentralised yet finite which makes it exclusive and valuable as everyone around the world demands to have a part in it. Many multinationals have made it to the headlines by accepting bitcoin as a medium of payment, while many countries including the UAE are allowing the regulated use of cryptocurrency.  This has opened doors for many investors looking for a solution to a common question of where to invest money in Dubai?

While cryptocurrencies can’t still be used as legal tenders to purchase any goods or services in the UAE, people have recognised its incredible potential. With the overall market capitalisation going over trillion dollars, Dubai is a global hub of cryptocurrency and blockchain technology. Certain rumours also state that UAE regulators are adopting a new legal framework and regulations to ease the adaptation of crypto and blockchain in the region.

However, people considering investing in cryptocurrency need to understand the associate risks. While the entire concept and hype around it looks promising, like stocks it is highly volatile and one should always diversify their investment portfolio and not rely only on one crypto for exponential gains.  

Things to Consider Before While Investing in Cryptocurrency

Get Educated About Crypto

Being the talk of the town for a while now, cryptocurrency has intrigued many investors. However, you should not invest your money in avenues that you don’t understand. Dedicate a good amount of time to learning everything about cryptocurrency. Never invest in something just because other people are. Understanding the practicality is essential, but what’s more important is to learn the basics like how was crypto set up and what is decentralised currency and blockchain, etc.

Start Small

Once you gain some knowledge, you can allocate a portion of your saving towards cryptocurrency, but you should keep your investment small and manageable. While starting out, only invest capital that you can afford to lose completely as it would be a speculative investment.

Stand the Test of Time

The digital currency world is probably the most volatile sector to invest in. While you might have heard success stories of making quick bucks through crypto, the market may go south real quick. In such a situation, investors should make research-backed decisions on whether to hold on or leave. All investments take time to grow and you need to stay patient amid the twists and turns of the market.

How to invest in Cryptocurrency

Cryptocurrency is accessible to investors in UAE through several exchanges that allow you to open an account and trade through them.

Pros and Cons of Cryptocurrency

  • Anonymity and transparency
  • Decentralized, self governed and managed
  • Highly secure and private
  • Protection from inflation
  • Vulnerability against digital scams
  • Risk of data loss
  • Highly regulated in most geographies
  • No cancellation of placed orders

7.      Forex

Forex trading has gained popularity in recent years. It is a highly traded market and has a history of outperforming stocks. Investors dealing in Forex trading buy and sell international currencies in a bid to earn capital gains. You buy one currency in exchange of another in Forex trade. With over $5 trillion worth of currencies being traded against each other every day, Forex is a good market in Dubai to invest in.

Unlike most other countries, the UAE does not collect tax from online Forex trading. Hence, many investors have turned to Forex markets in Dubai. The most popular Forex trade in Dubai is spot trading. Spot trading is nothing but purchasing one currency by selling another. The trader buys a certain currency at its buy rate from the broker, and sells another currency at its selling rate.

Things to Consider While Investing in Forex

Learn About Forex

Forex trading appears to be extremely straightforward, but it requires specialised knowledge. The leverage ratio for forex trades is higher than equities and several other investments. If you are new to Forex, it is recommended to educate yourself on the ins and outs of the exchange market.

Have an Organized Trading Plan

If you are looking to earn big from Forex, you should definitely have a trading plan in place to execute well-planned trades and take informed decisions. A plan is also important to ensure that your approach is systematic and strategic.

Get Over personal Bias and Emotions

Investors need to keep their emotions and personal biases at bay while trading in Forex. The money market is highly volatile, and it can get overwhelming in no time, but despite rapid price fluctuations, you should stick to your objective and stay away from haphazard decisions.

How to Invest in Forex

To invest in Forex, you first need to have a Forex trading account to buy and sell international currencies electronically. Once the account is ready you can use it to trade in futures, options and funds.

Pros and Cons of Investing in Forex

  • High potential for quick returns
  • Minimal insider price manipulation
  • Easy short selling and flexibility
  • High liquidity
  • No strong regulatory body
  • High volatility
  • Operational risk
  • No dedicated exchange in Dubai and UAE

Which is a Good Investment to Make Money?

Dubai offers multiple investment opportunities to all sorts of investors around the world and with new avenues like digital currencies, NFT, etc. coming into the picture, the sky is the limit for the investors in Dubai. There is a lot of potential in the existing and emerging markets for short term as well as long term investors. While we mentioned some of the most prominent investment options in Dubai, there are a lot more to explore.

The primary objective of investing is to strengthen your financial stability by generating extra income. Today, everyone is striving to find the best way to invest money in Dubai and earn capital gain over a period of time. Every individual’s investment plan differs on the basis of their objectives and research. However, it is always advised to diversify your investment portfolio across sectors, industries and avenues.

Here’s what you need to keep in mind before investing your money.

  • Assess your long term and short term goals, tentative time horizon and risk appetite
  • Take time to research and find the most suitable investment tools that compliment your goals
  • Compare different investment vehicles on the basis of different factors like investment cost, time horizon, degree of risk, returns, etc.
  • Try and avoid investment vehicles that yield high returns along with a high degree of risk, as there is a probability that the investor might end up losing their capital.
  • Seek advice from a financial expert and then finalise your decision. 

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