By Tareq M. Al-Saleh and bazaar staff
The days of hiding your money under your mattress are thankfully over. Still, it’s quite common to learn that many people don’t have the faintest idea of how to actually invest their money that’s idly sitting in the bank, and this is simply because the everyday person could feel that they aren’t equipped to take control of such major financial decisions. In this day and age, and with an overwhelming wealth of information available to us at our fingertips, this can be quite the daunting task. Nonetheless, it’s really integral to wrap your mind around the basics—starting with how you could invest your money, what fees are involved, and the impact that these fees could have on your investment returns.
There are many reasons to invest in today’s markets. Never before have markets been this global, and never before have we seen such an incredible opportunity to increase one’s wealth like we have today. If you’re dreaming of setting a little something aside to go traveling around the world one day, why not look to your bank for an investment opportunity? This is why an enlightening discussion with Gulf Bank’s AGM- Investments—Consumer Banking Tareq M. Al- Saleh is in order. Not only did Tareq devise and spearhead Gulf Bank’s brand new investment platform WISE that’s completely revolutionizing the way in which we could manage our financial investments, he also has some key tips to share about investing in general to help you get started.
What happens when you choose to invest
You’ve decided to invest your money with the bank—great! How this technically works is quite straightforward. Tareq breaks it down, “Fund houses manage client assets in various products including mutual funds and take key investment decisions to enable growth and accumulate wealth. In order to perform this role, typically the respective fund houses charge several types of fees, and may be incentivized to do so.”
Understand your investment fees
When you’re day dreaming about your splendid retirement home, set in tropical climes and surrounded by pristine blue waters, it’s so easy to forget about the actual fees that go into the type of investment that you are looking to make, and you could easily hand over your money to an investment manager expecting a specific amount in returns, when the reality isn’t quite so. Tareq says, “Investors in general focus primarily on returns while ignoring the impact due to fees charged by the investment manager. Due to the complexity in fee structuring, it becomes difficult for an investor to track the effects [of the fees] on returns. However, a small rise in fee could adversely impact returns in a sizeable way. Hence, it is more fruitful to invest with managers, who show all their fees in a transparent manner compared to the ones, who charge multiple fees.”
Tareq even broke down the different types of investment-related fees that one could expect, and he says that the most important investment fee to take into consideration is the management fee charged for performing all the needed activities to accumulate wealth on your initial investment. This takes work on your investment manager’s part, from “stock research and selection, portfolio construction, monitoring and rebalancing.” After all, your investment manager would be highly trained in this field, and would be able to grow your portfolio whilst taking into account both local and global market forces.
But you see, some other fees could easily add up. Tareq says that sometimes, a performance fee is charged by the managers “to ensure there is an ongoing incentive to outperform the market index. Apart from these annual fees, the fund also incurs regular operational costs including legal and audit fees, administration expenses, sales/agent commissions and marketing and selling costs,” and those fees are on top of whether or not your investment is returning a profit or a loss.
Also note the following, every time a fresh investment is made into your investment fund, or if you withdraw funds due to unforeseen circumstances or even if you have to close your investment early, a transaction charge is incurred by you. Charges are completely expected, especially when you’re just about to start your investment or you’re considering exiting a fund, but for every single action? This can become financially unviable, as these fees keep cutting into your potential investment profits.
So with all of these fees, you’re tempted to take your money and run away? Yes? That’s where you’d be wrong! With the right investment plan, the right fund house, and most importantly, the right investment manager who would offer you a simpler and more transparent fee structure— this is where the real potential for investment comes into play. Tareq insists that “a strategy that focuses on the containment of investment costs would equally help the investor to reap rewards in the long-term.”
Get to know your investment manager, get to know your investment structure
The relationship that you would build with your investment manager is paramount to a fruitful investment plan. Think of it this way, just as you would have a trusted tailor to create your bespoke custom-made work suits, you keep coming back to them because of the relationship that you built. Transparent investment managers can be truly hard to come by, and Tareq states that, “Different investment managers structure their fees in different ways. While some charge a flat fee, others tend to break them up into sub components based on a variety of criteria.” A good investment manager will just do the job, but a great one will inform you, and educate you about how your investment fund is going and how the process would actually work.
The power of investing wisely
Perhaps nobody understands these investment challenges better than Tareq. This is why he took all of these factors into account when the time came for Gulf Bank to launch WISE, an investment platform that simplifies the entire process of investing your money from A-Z. With simply a few steps, you can easily set up your account to invest in international markets in an easy, transparent, and most importantly, cost-efficient manner. Why do we love WISE? Its transparency, because you can easily check your investment portfolio anywhere and anytime from your personal devices such as a mobile phone or iPad. Tareq also gave us an even bigger incentive to get on board: A low, flat, annual fee and tax efficient investment when opening up an account with WISE. Gone are those pesky hidden fees that keep eating away from your potential investment profits.
Setting up your wise account is really easy. The experts at WISE first need to get to know you through an easy-to-understand questionnaire. Upon filling it out in mere minutes, the team (and expertly crafted banking algorithms) at WISE determine your financial goals (how much do you want to make), risk appetite (how much are you willing to possibly lose) and time horizon (over how many years) to create a portfolio that meets your needs. The WISE service follows the Nobel Prize winning passive index investing strategy by investing with a long term view in a globally diversified portfolio. From there, WISE invests your funds in low-cost and diversified Exchange Traded Funds, and your portfolio is annually rebalanced to meet your target investment goals.
In looking at all of the above challenges which Tareq spoke of, we feel that finding the right investment partner could be the most difficult one to manage. But with WISE, Gulf Bank’s investment advisors will be with you every step of the way to help you better understand how your investment objectives may be achieved.
Learn more about WISE in our next issue, where we sit down with Gulf Bank’s AGM- Investments Tareq M. Al-Saleh to discuss the potential of investing with Gulf Bank’s WISE platform and how you can get started with WISE today. For more information, please visit www.gulfbankwise.com.