DJ Martin Metcalf found he couldn't keep up the party lifestyle forever, so he settled down and began saving. But investing money depends on what the end game is.
Building the right portfolio
Everybody has to save for the future, even DJs who have spent years living the party lifestyle.
Martin Metcalf, 41, who lives in Dubailand, hadn't saved a penny when he met Rupert Connor from Abacus Financial Consultants five years ago. "I was living a raucous life. I'd worked all over the world, in Miami, Thailand and Ibiza, and didn't give my old age much thought at all. But if you don't start saving at some point, it will catch up with you in the end."
Mr Metcalf is now married with a young child, and that also inspired him to look to the future.
Mr Connor advised him to set up a pension plan containing a mix of global funds from different managers, including Jupiter New Europe, Schroder UK Mid 250, JPM Natural Resources and three HSBC funds investing in China, India and Brazil. "I invest at least 10 per cent of my salary every month, more if I have cash to spare," says Mr Metcalf. "I've got quite a lot saved now. It's amazing how it adds up."
He still works as a DJ, but is developing his skills as a graphic designer, designing websites and marketing material for nightclubs, bars and restaurants. "I can't do the late nights any more, I like to be tucked up in bed by midnight. Strange things happen as you get older, like taking out a pension."
Time is on Mr Metcalf's side - he doesn't retire for another 25 years or so, but many expats are investing for much shorter periods.
Before you start putting serious money away, you need to work out how long you are investing for - a key factor in deciding where you put your money.
Here's what you need to know for three different investment timescales:
One to two years
If you're saving for the short term to buy a car or build a deposit to buy a property, you have to play it safe, says David Hughes, divisional manager at independent financial advisers PIC (Middle East). "Stocks and shares are too volatile for short-term savings. If you've only got a couple of years, stick to cash."
The downside is that you will be lucky to get 1 per cent before tax, which means inflation will erode the value of your money in real terms. "But at the least your savings won't be destroyed overnight in a stock market crash," he says.
As savers discovered at the peak of the financial crisis, and again recently in Cyprus, sticking your money in the bank isn't risk-free. If your bank is declared insolvent, you could lose some or all of your money.
You must therefore check how much protection the local authorities give savers, Mr Hughes says. "Deposits in the UK are protected up to £85,000 (Dh474,000) per bank and €100,000 (Dh477,000) in the euro zone. If you have more, spread your money between different banks, making sure you don't breach local compensation limits."
Few expats keep their life savings in the UAE, because it will be distributed according to Sharia law if they die, Mr Hughes says. "Local banks such as the Abu Dhabi Islamic Bank have great customer service but larger deposits should be held offshore. We've had good feedback from clients with HSBC and Lloyds."
You should brace yourself for dismal interest rates. Lloyds International's US Dollar Bonus Saver Account pays just 0.95 per cent, of which 0.85 per cent is an introductory bonus that expires after 12 months. HSBC Advance Fixed Term Deposit pays a meagre 0.25 per cent over 12 months.
Cash is no longer king, but it's still the top option for short-term savers.
Five to 10 years
Investing for a longer period? Then put some of your money into stocks and shares, says James Thomas, a regional director at Acuma Wealth Management in Dubai. "The stock market can swing violently in the short term, but over time, your returns tend to smooth out."
Stocks and shares aren't for everybody, though. "If you're uncomfortable with the thought that your money might fall in value, then you may wish to avoid stocks and shares. But less risk typically means lower returns."
Don't simply throw your money at a few funds and shares that catch your eye, but reduce risk by building a diversified portfolio containing cash, bonds, shares, property and even commodities such as gold.
Experienced investors can actively trade individual company stocks through an offshore share dealing account, but most expats don't have the time or expertise.
For them, Mr Thomas recommends an investment "wrapper", offered by investment companies such as Skandia International, Friends Provident International and Generali International. "They offer so-called 'fund platforms' that let you choose from a wide range of funds run by different investment managers."
With hundreds of different funds to choose from, you have to be clear about your investment strategy and review it regularly, Mr Thomas says, adding that it's important not to lock all your money into long-term investments and keep some cash handy for emergencies, equivalent to at least two or three months' salary.
10 years or more
If you're investing for the longer term, whether for retirement or to build a pot of cash for when you leave the UAE, cash won't cut it.
You can afford to take more risks because you have more time to overcome short-term setbacks.
To invest successfully over the longer term, you need to be disciplined, says adviser Mr Connor. "Set up a regular monthly savings plan, then stick to it. This is particularly important with certain offshore investment plans, endowments and pensions, which can charge exit penalties if you don't maintain your monthly contributions for the full term of your policy."
Making regular monthly payments is also safer than paying in a single lump sum, which leaves you vulnerable to a sudden crash, Mr Connor says. "By drip-feeding in money every month, you sidestep the danger of committing all your savings at the top of the market. In fact, it actually helps if markets fall from time to time, as you will pick up more shares for the same monthly payment."
To fund a comfortable retirement, you need to invest more than just a few dollars every month. "You should invest between 5 and 20 per cent of your income, even more if you can afford it," Mr Connor says.
He says UAE expats should hold their long-term savings offshore, typically in an established tax haven such as the Channel Islands, Isle of Man and Guernsey, which give investors higher levels of protection.
Building the right investment portfolio is complex, and you may need independent financial advice. Mr Connor suggests: "Ask to see your adviser's qualifications, check how long they have been working in the offshore market, and make sure they have all the correct licences."
Whatever your investment timescale, make sure you are dealing with someone you can trust.