Best Short Term Investments in the UAE 2022

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When it comes to karak tea, the people of Dubai and the rest of the UAE will tell you that it is a deep rooted part of the traditions and history of the people here. As the people of the UAE mull over which short term investments they should pursue, a cup of karak tea has always been a reassuring constant.

However, things have changed recently. Until a few weeks ago, Karak tea had long held its price of 1 dirham, those days are now over. Now the price of a cup is 1.5 dirhams. A jolt to the national consciousness, this price hike is perhaps the clearest sign so far of inflation’s tightening grip. The best short-term investments in the UAE either keep pace with inflation or act as a hedge against it.

6 Best Short Term Investments For UAE Residents

That’s why it is a good time to take a look at some of the best short term investment options available to people in the UAE. According to our research, the best short-term investments for people in the UAE are: 

  1. Precious Metals (Gold and Silver)
  2. Bitcoin
  3. Certificate of Deposit
  4. Money Market Mutual Funds
  5. National Bonds
  6. Ethereum Staking

Best short term investments in overview

Investment TypeRisk LevelDifficulty cashing outFeesRisk v Reward
Precious MetalsMediumLowLowAverage
BitcoinMediumLowLowGood
Certificate of DepositLowHighLowAverage
Money Market Mutual FundsLowLowLowGood
National BondsLowMediumLowGood
Ethereum StakingMediumMediumMediumAverage

The Top 6 Short Term Investments Reviewed

Below is a detailed break down of the 6 top short term investments available to UAE citizens based on risk levels, fees, cashing out options and risk reward ratios, that will help you make an informed decision.

1. Precious Metals

Gold and silver are both historically reliable investments over the long-term. But is there also short-term value to be gained? Known as the “crisis commodity” gold is resistant to geopolitical and financial uncertainty. Although typically seen as a long-term investment, the price of gold is subject to significant volatility over the short term. 

Silver is not as expensive as gold, but its lower liquidity makes it even more volatile. Therein lies an opportunity for a savvy investor to take advantage of short-term price action. 

Below you can see the historic price of gold in USD/g. Notice the high volatility since around 2020.

Historic Price of Gold in USD/g

Historic Price of Gold in USD/g

As you will see in the chart below, the historical price of silver has similar patterns but some more extreme volatility. Again we have seen significant volatility in recent years.

Historical Price of Silver in USD/kg

silver-chart-50-years

Regardless of whether the price goes up or down, there are opportunities to make a good short-term investment with gold and silver. In a market characterized by volatility in recent years, UAE residents who want to speculate on precious metals with spot prices, options and futures have several options available. 

Go long or short and take advantage of short-term volatility. There are also ETFs and gold-linked shares on offer. If you would like to learn more about how to trade gold, check the following guide at Forbes which covers all the basics.

Strengths:

  • Easy to liquidate
  • Traditional long-term Inflation hedge
  • Supply constraints
  • Consistent demand

Weaknesses:

  • No dividends or interest
  • Gold and silver prices could easily fall in the short-term, requiring a strategy
  • Strength of the US dollar

Risk Level: Medium

  • Investors with a strong strategy and the discipline required to go short or long as the situation dictates could still reap rewards on a short-term investment.

Difficulty cashing out: LOW

Gold and silver are easy to liquidate. 

Fees: LOW

Minimal fees for buying gold and silver online

2. Bitcoin

Have you heard of a Bitcoin halving? That’s what all the commotion was about in mid-May 2020. Bitcoin is a decentralized digital asset. A halving is so named because, when one comes along roughly every four years, the value of every block on the Bitcoin network reduces by half. Historically, these events have had a significant effect on the Bitcoin price. 

The next halving is expected to occur in April 2024. It’s anybody’s guess as to what the price will be then, but previous halvings have always triggered extreme subsequent volatility.

Bitcoin Halving Events – Price Volatility

Bitcoin Halving EventEvent DatePrice at Bitcoin Halving EventPost-Halving High Price
First28 November 2012US$12.20 (28 Nov 2012)US$1,217 (28 Nov 2013)
Second9 July 2016US$626.87US$19,800 (15 December 2017)
Third11 May 2020US$8,755.54US$64,400 (12 November 2021)
FourthExpected ≈April 2024??

Bitcoin halving’s are among the most crucial events that occur on Bitcoin’s blockchain. With the supply of newly mined BTC is reduced by 50% for every halving, this also increases the inflation rate. Analysis of historic data shows that investors predictions let the bitcoin price rise several months before the actual halving.

Strengths:

  • Easy access to funds
  • Easy to transport
  • Past trends support a short-term investment

Weaknesses

  • Self-custody necessary
  • Not your keys, not your coins
  • Exchanges may not release your coins easily/quickly

Risk level: MEDIUM

If your timeframe is 1-2 years, the risk is higher of price depreciation, but most Bitcoin price predictions for 3-5 years are optimistic. Halvings typically precede price increases, but these are always followed by a steep fall. Historical data is also not a reliable indicator of future events.

Difficulty cashing out: LOW

Bitcoin is easy to cash out at an exchange where you have KYC and anti-money laundering checks completed. 

Fees: LOW

Many exchanges have very low fees in place for Bitcoin purchases and sales

3. Certificate of Deposit (CD)

If you want to try to keep pace with inflation by keeping your investments in fiat, a Certificate of Deposit (CD) may be for you. As long as you do not withdraw the balance before a pre-agreed duration, you can take advantage of stable growth without losing your original deposit. 

Shop around to find the most competitive rates for CDs. When evaluating a 5-year CD, compare more than just the APY offered. 

To find an example of a CD for UAE or even get a small table with the best performing CDs, check all of the following:

  • APY offered
  • Minimum deposit required
  • Early withdrawal penalties
  • Whether the CD renews automatically
  • The whole market to find competitive rates

Strengths:

  • Higher interest rates than savings accounts
  • Predictable returns
  • No monthly fees

Weaknesses:

  • Interest rate risk
  • Early withdrawal penalties
  • Typically lower returns than stocks

Risk level: LOW

Simply commit your funds and wait. This is one of the lowest risk strategies covered in this article.

Difficulty cashing out: HIGH

You need to see the term out. If not, prepare for significant early withdrawal penalties. 

Fees: LOW

Upfront costs range from non-existent to minimal

4. Money Market Mutual Funds

Money market mutual funds allow you to invest in short-term securities like treasuries, municipal and corporate debt, and bank debt securities. The mutual fund manages the assets whilst you pay them an expense ratio. You can withdraw your investments at any time without paying extra fees. 

Comparison of the Top Mutual Funds 

To help you choose the right mutual fund for you for a timescale of up to 5 years, check the table below listing the best performing with a max rating of above 95%.

Mutual FundsTickerMax Rating1 year3 year5 yearMinimum investment
Shelton NASDAQ-100 Index Direct
NASDX98-7.4%21.7%17.2%$1000
Voya Russell Large Cap Growth Index FundIRLNX100-3.7%19.9%16.9%0
Fidelity NASDAQ Composite IndexFNCMX95-11.4%18.4%15.2%0
Fidelity 500 Index FundFXAIX980.3%16.13%13.4%0
Schwab Fundamental U.S. Large Company Index FundSFLNX974.2%18.14%13.4%0
Vanguard Dividend Growth InvVDIGX975.8%14.6%13.5%$3000
DFA US Large Company IDFUSX99-0.4%16.4%13.3%0
Northern Stock IndexNOSIX98-0.4%16.3%13.3%$2500
T. Rowe Price Equity Index 500PREIX95-0.5%16.2%13.2%$2500

Strengths:

  • Safe
  • Short-term
  • Great liquidity
  • Low costs
  • Very low risk

Weaknesses:

  • Low returns
  • Loss of purchasing power
  • Some money market investments are not FDIC insured

Risk Level: LOW

Risks are low as long as you choose a reputable provider

Difficulty cashing out: LOW

Withdraw at any time without paying extra fees 

Fees: LOW

Fees are very low

5. National bonds

Because the interest rate is agreed up front, national bonds are one of the safest short-term investments in UAE. These are bonds issued by the government of UAE, and usually beat the rates of interest available in banks. You can buy national bonds at exchange houses and banks that have them available or online through National Bonds; an organization started by the Dubai government which also holds a 50% stake. To sign up and buy, you need to provide a copy of your passport, Emirates ID or driver’s license. If you are an expat living in the UAE, you must provide a copy of your passport with a valid UAE Visa and entry stamp.

Investing in national bonds start with as little as 100 AED. The aim is to give the UAE people easy access to low-risk savings with good returns. You can buy a bond and earn interest on it until its maturity. At that point, your investment amount is returned plus all the interest you earned. 

Returns for UAE National Bonds – 2021

BondProfit
Over AED 1 million3.27%
Between AED 350k and 1 million2.7%
Between AED 150k and 350k2%
Between AED 100k and 150k1.36%
Between AED 50k and 100k1.11%
Between AED 5k and 50k1.1%
Regular savings bonds1.5%

Strengths:

  • Secure investment
  • Lower rate of return
  • Community oriented

Weaknesses:

  • Lower rate of return
  • Interest rate risk

Risk Level: LOW

If interest rates go up, you lose out since you must remain on the interest rate you agreed to. However, this is not a problem if you hold the bond until its maturity

Difficulty Cashing Out: MEDIUM

You will have to pay penalties if you cash your bond in too early

Fees: LOW

Upfront fees are negligible

6. Ethereum Staking

Ethereum staking rewards are approx. 4% APR

Ethereum is a cryptocurrency network. Its native token is called ether (ETH), which has a market value and witch primary function is to help secure the Ethereum network. This is done through a process called staking. It involves you committing your tokens for a period of time, not withdrawing or trading them either. In return you get ETH as a reward. Here’s a good calculator to work out what kind of returns you can expect from staking depending on your circumstances. Some of the terminology can seem daunting to first timers, but there are explanations provided too.

ethereum-staking-graph

You would need the princely sum of 32 ETH to run your own validator. Happily you can bypass this obligation – and still earn – by staking at exchanges or joining a staking pool. But remember if the price of ETH falls, then that would rapidly eliminate your gains. If you want to avoid the extra risk of price volatility, then you may want to stake stable coins instead.

Risk level:MEDIUM

In the short-term, the price of ETH could fall, wiping out profits from staking. Over a 5-year period, however, forecasts tend to gravitate around the $12,673.76 suggested by Changelly but nobody can know for sure.

Difficulty cashing out: MEDIUM

Staked ETH cannot be unstaked or transferred until the Shanghai upgrade is complete. However, providers such as Lido offer a “liquid staking solution”. This means you can withdraw your staked ETH at any time.

Fees: MEDIUM

Ethereum staking services almost always charge a fee. This can range from a flat fee of 0.1 ETH to a 25% commission on your rewards before they are sent to you. You will need to shop around to find the best rates.

How To Choose The Right Short Term Investments?

We have ranked all of the short term investment options in UAE in terms of their risk vs. reward (good, average, poor) and explained the strengths and weaknesses for each, to help you make an informed decision.

Risk level: Good short-term investments are less risky than stocks, which are volatile and can lead to significant losses. 

Difficulty cashing out: The best short-term investments can be cashed out fast. For example, investments like real estate aren’t liquid. 

Fees: Short-term investments should have negligible upfront costs or ancillary fees.

A good starting point when deciding among the different short term investments are the following questions:

  • Maybe asset volatility is more important to you? 
  • Perhaps early termination and fees are the crucial factor in your decision. 
  • Are you willing to take high levels of risk or do you want a relatively safe short-term investment?
  • Are you willing to take a loss on your original investment or do you want to keep that safe at all costs?

Also consider choosing multiple options so you can diversify and spread your risk.

Conclusion

Short-term investments often come with higher risks than long-term investments. Short-term volatility is a double-edged sword and prices can easily move against you. Be aware of the risks involved and do your own research to get as much information as possible before investing in any of the products described in this article.

When deciding which short-term investment is right for you, remember that its important to consider your own specific circumstances. All of the investments summarized here are suitable for a timescale of up to 5 years, but many would be good long-term investments too. If you invest with the right strategy or investment vehicle, many of them could yield substantial returns. However, you will need to work out what is important for you first. 

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Stefan Grasic (Dipl.-Jur) is the World Wide Director of research for Buisness24-7 and has considerable experience in the financial and investment niche, but also enjoys writing articles for the general readership. Stefan is an active Crypto, Forex and general investment researcher advising blockchain companies at their start up level. He keeps fit by mountain biking, surfing, skiing and lots of other adrenaline sports.

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