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June 24, 2024

Mike Coady Discusses Investing With Fortune Arabia

Mike Coady, CEO at award-winning Skybound Wealth Management discusses the pros and cos of gold, real estate, stocks, and cryptocurrencies with Fortune Arabia.

Mike Coady Skybound Wealth CEO Fortune Arabia

The International Monetary Fund recently stated uncertainty has become increasingly prevalent in light of conflicts, the disruption of shipping traffic, the decline in oil production, and uneven recovery. Mike Coady, a UAE based financial advisor spoke to Fortune 500 Arabia about this outlook and what assets investors should consider as a result.

The primary purpose of saving is to provide financial security and quick access to money when needed, making it ideal for short-term goals or emergencies. However, investments are intended to build wealth and achieve long-term goals such as securing retirement costs, education fees, or purchasing real estate.

Understanding these differing purposes is critical for effective financial planning and achieving financial goals, according to Coady.

“Before choosing the assets that suit you to best, you must take into consideration several things, such as risk tolerance, time horizon, market conditions, and personal financial goals. For example, real estate is suitable for those with a long-term perspective and prefer tangible assets, while cryptocurrencies may attract those with a high-risk tolerance.”

According to Coady, each savings option comes with its own set of risks, and typically, the lower the risk - the lower the return.

“Keeping your savings in a bank is generally low risk, but also offers minimal returns. Fixed deposits may offer better returns, but they are generally tied to a fixed term meaning you cannot access the funds within the agreed period.”

And with many commentators expecting lower interest rates this year, it’s likely that banks will become an even less attractive option. Here we consider the most popular savings assets with their advantages and risks.

Dollar Or Hard Currencies

In countries that suffer from economic problems, some people tend to transfer their savings into a strong foreign currency, especially the dollar. This is currently happening in Egypt, Syria, Lebanon, Yemen and other countries. This type of saving is compatible with immediate goals, i.e. investors that may have to use their money within a very short period.

With exchange rates prone to rise and fall over the short term, bad timing can be all it takes to decimate your savings.  However, one of the most popular features of this method of investing is the ability to liquidate your investment very quickly.

Gold  Fortune Arabia Mike Coady

Gold

Often considered one of the safest of safe havens, Gold is generally not negatively affected by inflation. In fact, its price tends to rise the more markets suffer and the value of currencies declines. Currently, gold prices are recording record numbers for several reasons: Including central banks hedging it, and the Chinese tending to hedge it, especially in light of the commercial real estate crisis and the anticipation of lowering interest rates, which makes bond yields lower. Therefore, there will be a trend towards safer havens.

In short, for those who don’t like the risks of entering the stock market, and investing with a long-term view, gold remains the most suitable option.

According to the World Gold Council, “Gold plays a key role as a long-term strategic investment and a primary allocation in a well-diversified portfolio.”

Real Estate

In terms of transferring savings into real estate, this depends on the size of the savings (buying real estate requires larger amounts than investing in gold for example), and when you want to liquidate your savings. If you need to sell a property suddenly to raise some capital, you may find yourself doing so at a loss.

Purchasing a property is considered a safe bet that can achieve a monthly or annual return if rented. It preserves the value of savings, and may even achieve huge profits over time. It's value is also not negatively affected by inflation. Rather, real estate prices and rents increase with the increase in prices in general, but the process of selling a property takes much longer than gold, especially if the market is suffering from the state of stagnation.

The need for real estate remains, however, the time frame to benefit from this type of investment must be long: Compare the price of your house in which your family lives today and its price when your grandfather bought it, and you will see that it keeps up with inflation, not the other way around.

You can maximize your savings by selling property during periods of real estate activity, then converting its price into gold until you find another property at a good price during periods of low prices, and so on until the savings are maximised further.

Stocks

Unlike property, investing in the stock market does not require huge amounts of money, but this method tends not to appeal to the inexperienced or more risk averse investor. While you can invest in individual companies, diversification across multiple companies and industries is one way to guard against volatility.

Historically, all major stock markets have demonstrated growth in the long term in spite of crashes and corrections. So, once again this type of investment is best utilised as part of a long term strategy. There are of course examples of individuals ‘timing’ the market,  but this approach is often down to luck rather than judgment and those who have truly benefited from the stock market are the ones who hold their nerve in bad times, and allow their investment to grow over a longer period.

Mike Coady Talks Cryptocurrencies With Fortune Arabia

Cryptocurrencies

If saving in stocks requires some patience and risk, then saving in cryptocurrencies may require both x10! Cryptocurrency crashes can be as spectacular as their gains. In addition to being highly sensitive to economic and political events, these currencies are not linked to central banks or to a specific economy and have no counterpart in precious metals

At the end of 2022, the cryptocurrency market lost $1.5 trillion, before Bitcoin jumped 160.34% by the end of 2023.

The periods of decline, losses, and collapses that Bitcoin has been exposed to cannot be neglected when making the decision to save in it. In November 2021, its price reached $68,000, before collapsing to $17,000 in November 2022.

Despite this, according to the blockchain data platform, Chainanalysis, the Middle East and North Africa region ranks sixth in the world in the cryptocurrency economy, with the value of transactions reaching approximately $389.8 billion in the period from July 2022. Until June 2023, the percentage of these transactions amounts to 7.2% of the total cryptocurrency operations globally during that period.

How Do I Choose Between Which Assets To Save?

No single asset is better than others, with each having its advantages and risks. The choice between them often depends on the individual, but a diverse portfolio that includes some, or all asset classes is one way to protect against volatility. Diversification across different asset classes can reduce risk and increase the potential for returns, and forming a flexible portfolio that includes assets such as gold can serve as a hedge against inflation and economic downturn.

Diversification helps mitigate risks by distributing investments across different asset classes, which may lead to more stable returns over time. However, it requires careful management to ensure the right balance between risk and return. Excessive diversification can weaken gains potential, while less diversification may expose investors to increased risk.

Speak To A Financial Advisor

It is necessary to regularly review and adjust your strategy in response to economic indicators, shifts in the market and changes to your circumstances. Staying informed and being proactive about modifications is key. It's vital you never become over reliant towards a certain type of asset class in your portfolio, no matter how circumstances change. Enlisting the support of a qualified financial advisor with both local understanding, and global knowledge can be just as important as the vehicles you choose to invest in.

Book A Consultation With A Global Financial Expert At Skybound Wealth Management Now

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Disclosure

Written By
Mike Coady
Chief Executive Officer
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