UAE investors need more savvy

Nabeel Waheed, Chairman of Makaseb Funds Company BSC (C) (MFC), said that when stocks rise significantly over a period of time, as in the UAE,reletively inexperienced investors tend to jump on to the bandwagon hoping to make quick profits. Such investors are better served by seeking professional advice.

"Professional investors and fund managers have multiple investment strategies which are suitable for managing risk and optimizing performance over market cycles. Unfortunately, inexperienced short-term investors looking for quick returns are the ones who suffer most when there is a quick downturn," said Waheed. "It is important for investors to have a long term perspective when investing in equities,".

He said the growth in the value of stocks listed on the UAE stock exchanges over the past two years had given some investors unrealistic expectations for both profits and investment horizons in equities.

"Investors should always remember that stock values can and do go down as well as up. The golden rule is to spread your assets across a diverse portfolio of investment products, rather than putting all your eggs into one basket. Depending on investment objectives, investment managers can recommend appropriate strategies to clients. It is also important to think long term," said Waheed.

The banker pointed out that over the past two years the UAE share price index has climbed over 400 per cent while the economy has been growing at about seven per cent.

"Although the economy is healthy, people must realise that share prices are also influenced by market fundamentals and do not exist in a vacuum. Some shares, which have done well in the past, now command unrealistically high P/E (price-to-earnings) ratios that are higher than the P-E ratios of many international blue chip companies. In this situation, investors must carefully examine the short term potential returns and focus more on the long term investment horizon." concluded Waheed.