Investment Diversification – How does it Works?

By Sakshi Srivastava - 07 Mar 2022 Last Updated: 05 Jul 2022
Investment Diversification – How does it Works?

Act of spreading investment diversification dollars among a variety of assets to lessen investment risk is known as diversification. Because no single asset has an outsized impact, a diverse portfolio helps to balance volatility. By the help of this blog Dhanguard will give you more information about investment diversification in UAE

 

What is Investment Diversification?

The act of spreading investment dollars among a variety of assets to lessen investment risk is known as investment diversification. It's part of asset allocation, which refers to how much of a portfolio is allocated to different asset classes, or groups of comparable investments.

Investment Diversification is the most straightforward strategy to increase investment diversification returns while lowering risk. You protect your portfolio from market volatility by not putting all of your eggs in one basket. There are numerous tools available to assist you in diversifying your financial accounts.

How is the UAE diversifying its Economy?

It's easy to see an oil-dependent United Arab Emirates (UAE) cringing at the notion of such a surplus as oversupply concerns stifle the global oil price's march back upwards following its flirting with the underbelly of the AED50 mark late last year. However, this isn't the case any longer.

In recent years, the UAE has undergone a macroeconomic revolution, driven by a desire to move away from the one-commodity economy that it was originally known for. The implementations of a 5% VAT in 2018, as well as significant, initiative-driven investments in infrastructure, education, healthcare, and renewable energy, have all contributed to the UAE's expanded diversity. As a result, the UAE has been able to withstand large swings in oil and gas prices.

As prices plunged in the latest 'black gold' saga in 2018 (prices fell 30% in November), the UAE was able to absorb a major portion of the shock thanks to its large fiscal surplus.

The focus of this expenditure is inward, with slightly over 40% of the budget going to 'community development,' which includes infrastructure, education, and healthcare.

With non-oil industries accounting for more than 70% of the federal government's revenue and various government efforts aimed at increasing this percentage now ongoing, the signals for economic diversification are optimistic.

First Move

Over two-thirds of the world's population is within an eight-hour flight of the UAE, which intends to use its strategic location between east and west to become the 'Capital of the Islamic Economy' and a crucial trading gateway into Africa, Asia, and Europe. (For further information, see our article

State-sponsored initiatives and the 'National Innovation Strategy' have been introduced to carry out this planned investment diversification.

The ambition to move to a knowledge-based economy underpins these policies, with achieving excellence in six national priority areas:

  • Healthcare of the highest caliber
  • Excellent educational system
  • Infrastructure and the environment that are both sustainable
  • Identity preservation and a cohesive society
  • Public safety and a just judiciary
  • Knowledge-based economy that is competitive

Plans for the Future

Fiscal policy has invested heavily on infrastructure as a crucial pillar contributing to the diversification of the UAE economy, owing in large part to Dubai's hosting of Expo 2020.

With over 25 million visitors projected throughout the course of the Expo's six-month run, the event is estimated to generate 277,000 new employment and necessitate not just suitable tourism infrastructure, such as hotels, but also the testing of existing port, road, and aviation infrastructure.

According to BMI Research's UAE Infrastructure Report, the UAE will spend AED89.93 billion on infrastructure by 2026. The big projects have also been aided by the UAE's relaxation of laws that previously restricted bank credit to real estate firms.

Providing Energy for the Future

The UAE's Energy Strategy 2050, in keeping with its initiative-driven spending, aims to power the country and achieve its environmental goals using a mix of clean energy, gas, nuclear, and clean coal sources. To accomplish so, the UAE government plans to invest AED 600 billion by 2050 to "meet the growing energy demand and assure the country's economy's sustainable growth."

In the UAE, nuclear energy is a top priority. It has been selected by the government as the primary future source of non-hydrocarbon electricity. It is hoped that its four nuclear reactors, which were designed in South Korea and are expected to be online by 2020, will provide roughly 25% of the UAE's electrical needs.

However, projects such as the construction of nuclear power plants have not been primarily the responsibility of the government.

Investing in Education

With education and healthcare at the forefront of its efforts to build a knowledge-based economy, the UAE has prioritized its citizens, allocating more than half of its 2019 federal budget to education and social development.

The UAE's investment diversification in skills and training, which will total over AED 10 billion in 2019, aims to increase employment possibilities and overall competitiveness. This domino effect is also expected to draw investment diversification to the area, which will help to strengthen the UAE's social environment and make it more appealing to live in.

Considering the Future

The UAE, which is already a centre for technical innovation and small to medium-sized businesses (SMEs), appears to be on a promising path. Although it is still laying the physical foundations for the future in some areas, the UAE's combination of progressive, government-led socioeconomic initiatives, record fiscal budgets, enticing foreign investment diversification opportunities, and an increasingly welcoming business environment suggest the UAE is doing everything it can to diversify away from its reliance on oil.

Conclusion

Dhanguard is a fully operational office that offers a wide range of services, including corporate structuring assistance, company creation, secretarial services, and fund administration (regulated by the DFSA). Dhanguard has also established specialized knowledge in a variety of support services, such as visa services and administrative services related to operating a business in the UAE. Here's where you may discover more about Dhanguard's UAE services. Connect with experts of Dhanguard if you need more information about Investment Diversification.

Investments is made simple and hassle-free with Dhanguard in Dubai, UAE. We provide you various investment options like Index Fund, Gold, Mutual Fund, Stocks, SIPs, Bonds, Fixed Deposite, Sukuks with the minimum possible trouble including paperwork & payments.

By Sakshi Srivastava

07-Mar, 2022

Investments Related FAQ

Frequently Asked Questions

  • Why should one Invest?

    Earning money now is insufficient, since it may not be enough to meet life's financial objectives. As a result, it is critical to spend money. Saving money in the bank is the same as giving up an opportunity to make money. It is crucial to invest carefully in the different plans available on the market, choosing the one that is ideally tailored to your objectives.

  • What is the eligibility to buy Investment Plans?

    With new technologies and goods, the investment market is rising by the day. The conditions for investing in different forms of investment instruments differ depending on the providers in the UAE.

  • What are the best Investment for Expats in UAE?

    Expats can invest in stocks, bonds, real estate, cash, UAE mutual funds, or other forms of funds in the UAE.

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