I have never invested my money in the stock market. I had not considered it, to be honest. I depend on other ways to generate an income, such as managing a small business and freelancing.
But with the excellent performance of the Dubai and Abu Dhabi exchanges over the past few months, my friends who were once like me and had never invested have opened accounts at brokerage houses to have a piece of the cake. Their morning conversations switched from “what are we going to do this weekend?” to “buy in this, and sell that”.
With the topic of stock investment and the UAE's strong market performance now the focus of almost every conversation I am engaged in, I still cannot say that I am any more interested in this subject than I was before.
That said, it is good to see that more Emirati women and men of my generation are on the lookout for more ways to diversify their earnings and do not solely depend on their paycheque at the end of the month.
Some of my colleagues have a different view on earnings diversification, however.
Last week a colleague and I were discussing the recent market hype and how it has pulled in so many of our friends and acquaintances. I applauded the recent decisions made by many young Emiratis to invest their money, even if I was not interested in that field myself.
He put his newspaper down and said that unlike me he was against seeking diversified earnings, as it made one lose their focus. He said that once a person has multiple income generators they do not concentrate on one source and dedicate their energy to it, and instead their concentration would be stretched.
He mentioned that a while back, in addition to his job, he started investing his money in American listed stocks. In a short period he tripled his initial investment. He was so happy with his success that he became immersed in the process of buying and selling shares, until he lost focus on his job. He knew that if he kept at that rate his job would be affected, and thus decided to withdraw his money and stop his investment activities.
I do not agree with the logic behind his decision – I think that income diversification, even if not through stocks, is important. The only constant thing in this life is change, and corporations make different decisions all the time, such as laying off employees no matter how good they are. In addition, there are some things that we cannot predict or control, such as illness, damage to property or accidents that could injure us and those who depend on us.
The American business investor and tycoon Warren Buffett has mentioned that one of the key ways to generate great wealth is to diversify investments over time. This principle that we should not place all our eggs in one basket is not new.
Wealthy people have multiple income generators. In fact, they are wealthy because they worked to develop multiple income sources, so that when one source is blocked their income flow is not strongly affected.
Investing in stocks as my friends have done is one way to diversify income. A good plan is to have a diverse portfolio where investments are made through different channels such as stocks, fixed-income deposits, a small business and a steady income from a job.
There are many other methods of diversification, some of which do not require capital investment. One way is to look at a talent that we possess. For instance, you could already have a good corporate job, but you have great graphic design skill. With the help of a website to display your portfolio of work, you could start a freelance business. The only investment here is your time. The same could be applied to other skills such as writing, consulting or fashion designing.
Having a steady income through a job that pays at the end of the month is a blessing. But depending on that alone could be a curse. Diversifying income sources will not only guarantee an income if one source dries up, but could also be the route to great wealth.
Manar Al Hinai is an award-winning Emirati writer based in Abu Dhabi. Follow her on Twitter: @manar_alhinai
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