x Abu Dhabi, UAEMonday 24 July 2017

Humble roots to long-term gains

The life lessons he learned while studying in the US that gave this executive at Nbad a better appreciation of the value of the dirham and the dollar.

Ahmed al Naqbi spends 10 per cent of his income to cover essential costs and another 10 to 20 per cent on his wants.
Ahmed al Naqbi spends 10 per cent of his income to cover essential costs and another 10 to 20 per cent on his wants.

After growing up in Abu Dhabi, the US and France, I begun to appreciate the value of money and learned to understand the difference between my needs versus my wants.

My parents, of course, took care of my needs. They wanted me to learn how to control my spending on non-essential items such as sneakers, video games, or movies. When I was nine or 10 years old my parents started giving me a weekly allowance of about Dh100, which was not much. With my allowance I was allowed to buy what I wanted, but my parents expected me to save some dirhams in a savings account. I made my first investment when I became a teenager, putting money into some mutual funds.

When I started university I learned how to be poor and how to live on a ridiculously low amount of money. I can still remember the moments when I would eat nothing but instant noodles for dinner. While I was studying for my bachelor of fine arts in web development at Virginia Tech I received a scholarship from the UAE Ministry of Education. The scholarship provided me with a monthly stipend of $900 (Dh3,303), which had to help me cover rent, food, gas, bills and some entertainment expenses.

Thankfully, I was in a small college town, which wasn't very expensive to live in. But those years when I was a student really taught me how to live on a limited budget. For the first two years of my degree I lived in dormitories and moved off campus for the last two. My rent was $300 per month, an amount that forced me to be judicious with the rest of my income. I shopped at value retailers such as Wal-Mart and limited my food bills by eating my meals at home. I also was living with my sister and brother and we all watched for basic things such as turning off lights when we went out.

Even though I lived a parsimonious life, I started investing in the US stock market in 2001. I felt that it was a good time to buy stocks because values had depreciated due to the September 11 attacks, even though the overall economy was sound and people were still spending. I firmly believe you should invest in something you understand. Unfortunately, too many people make investments that they don't understand. For example, several years ago so many people in the UAE were putting their capital in investments because everyone was doing the same thing, even if they didn't fully understand what they were doing.

When I choose my stocks, I investigate at the overall health of a company and its products. I don't base my investment decisions on television programmes that tell people which shares to buy. For instance, I bought Apple stock when it was trading at $7 a share after I purchased a PowerMac G4 in 2001 and was impressed by it. Unlike PCs, it never crashed, the operating system was powerful compared to Microsoft Windows, and the design was slick. I knew it was something that would appeal to consumers and that Apple would be a good company to invest in. This is even before Apple introduced the iPod.

I still have my Apple shares, which now trades at over $175. I returned to the UAE after I graduated from Virginia Tech in 2005 because of the opportunities that were available here. I'm now the head of channels & electronic banking at the National Bank of Abu Dhabi. Working in a bank has taught me money-management strategies. Money has no real value because it depreciates over time. On the other hand, tangible investments grow. So, I don't believe in holding on to cash unless there is a purpose for long-term investment.

People should realise that money is only paper and that they should let it work for them. For example, I'm saving to make down payments on some properties. I spend roughly 10 per cent of my income to cover my essential costs and another 10 to 20 per cent on my wants, mostly on travel. Basically, 50 per cent to 70 per cent of my income goes into savings and investments. I believe the best investments to have are in gold and property because they are real and tangible. I prefer the property market because it can provide you with a recurring revenue stream. I think gold is relatively safe because it is a commodity that is always in demand.

I buy hard gold at the gold souk in Madinat Zayed, where shops sell pieces and bars of the metal. I have invested in the UAE property market, but now I'm shifting to Europe and the US, where the housing crash has created opportunities. In the long term, the US and European property markets are very secure because these areas already have reliable infrastructure in place. This is very exciting for me because I'm only 27 years old and I'm building my own financial portfolio. It's very fulfilling and you get a sense of satisfaction from watching it fully develop and grow.

I still have my Charles Schwab brokerage account that holds some of the stocks that I bought when I was in university. However, I do not actively invest in the stock market these days. I do not invest in UAE stocks even though the low valuations are tempting. The UAE market is not mature or well-regulated. I often pause when you see shares of a company rise after it reported a loss in earnings or a stock decline after it reports profit growth. Investing in this market feels like gambling instead of an educated guess.

I'm a humble person and I don't generally buy luxury things. Traveling makes up the bulk of non-essential expenses. This summer I travelled across Europe. Last year, I rented an RV and travelled across the US with some of my friends in America. I think people who feel empty inside have the need to show off but people who feel fulfilled are happy with their lifestyle. The lessons my parents taught me have served me well. This is something I do not see in today's generation. In the Emirates, many have taken financial comfort for granted.

Not only are children not trained to save, you have many parents that provide all the needs and wants of their children. This could lead to another financial crisis, because when people want that next luxury car they'll just go to banks and take a loan out.