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US $5,000

The best way to put this sum to work is to pay down any outstanding credit cards, debts or loans, says James Thomas, the regional director at Acuma Wealth Management in Dubai. “These charge higher rates of interest than you can expect to generate from your investments, so it makes sense to pay them off first. Just check you won’t have to pay any early surrender fees.”

Next, consider setting up a cash reserve for financial emergencies.

If you are free to invest all of the cash, you have to ask yourself a few questions. “How long are you looking to invest for? Do you need access to the money? Why are you investing? How much risk are you willing to take?”

If you need the money in the next three years or so, keep it safely in the bank, rather than taking a chance on the stock market, Mr Thomas advises.

Your choice of offshore accounts may be limited, because many offshore banks set a minimum deposit of $10,000, although others set their benchmark at $5,000.

HSBC’s Online Bonus Saver Account, for example, pays 0.1 per cent plus a 0.55 per cent bonus on months when you don’t make a withdrawal, taking the total return to 0.65 per cent. Minimum balance is $5,000.

Those that want to deposit their money locally could consider a fixed-deposit account, with some UAE banks offering returns of up to 5 per cent that accelerate over time (see Three of the Best on b9).

Alternatively, National Bonds, a Sharia-compliant investment scheme, offers annual profit rates on bond holdings.

The profit rate for 2012 was on the lower side at 1.5 per cent but bondholders can win cash prizes ranging from Dh50 to Dh1 million, as well as cars and gold to boost their returns further.

You will need a lot more than $5,000, however, if you’re saving for a major goal, such as a property deposit or retirement.

$50,000

You have more options if you have this amount to invest. But again, you should start by paying down expensive short-term debt such as credit cards and loans, says Chris Ferguson, the managing director (UAE) at Guardian Wealth Management.

Expatriates can get a slightly better rate of interest by locking the money away in a fixed-term offshore savings bond. The Lloyds Bank Fixed Term Deposit account, for example, pays 1.1 per cent on £10,000 and above, 0.75 per cent on $10,000, and 0.3 per cent on €10,000 (Dh50,500). Maximum balance is either $5 million, £5m or €5m

If you’re investing for the longer term, say, five years or more, then you should tap into the greater returns generated by the stock market, Mr Ferguson says.

He recommends building a balanced portfolio of investments covering the major asset classes, stocks and shares, bonds and property. “Use low-cost investments that offer greater value for money, such as index-tracking funds and exchange traded funds (ETFs). These often outperform more expensive mutual funds, and have much lower charges,” he says.

ETFs are traded like stocks and shares, have no initial charges and low annual fees averaging just 0.5 per cent. By comparison, mutual funds charge up to 5 per cent initially and 1.5 per cent every year after that, eating away at your returns.

Popular ETFs include the iShares FTSE 100, which tracks the London stock market, the SPDR S&P 500, which tracks major companies in the United States, and Vanguard European.

You also have to review your portfolio regularly, to make sure it still matches your attitude to risk, Mr Ferguson says.

source: http://www.thenational.ae/business/indu ... oney#page1