How to Invest in the Stock Market in the United Arab Emirates?

What is stock market investing?

Investing in the stock market involves buying financial securities – mainly stocks or bonds – with the aim of making a profit in the medium or long term. These securities are traded on financial markets, where buyers and sellers meet.

Investing in the stock market allows you to become a shareholder in a company (through stocks) or a creditor (through bonds). In return, the investor can receive income (dividends or interest) and hope for a capital gain when reselling the securities. This type of investment is therefore a way to grow your savings by taking advantage of the development of companies and the economy in the United Arab Emirates.

Unlike speculation, which is based on short-term operations that are often riskier, investing in the stock market is part of a long-term logic. It requires a good understanding of how the markets work, accepting a share of risk and diversifying your investments to limit exposure to losses.

What are the different accounts for investing in the stock market in the United Arab Emirates?

To invest in the UAE's financial markets, you need an appropriate investment account to hold your assets (such as stocks, bonds, ETFs, or real estate investments) and to execute your trades. The UAE offers a variety of account types, each tailored to different investor profiles, objectives, and regulatory frameworks.

Below is a comparative table to help you identify the most suitable account type based on your investment goals and experience:

Once you've chosen the appropriate investment account, you'll need to select a financial intermediary to facilitate your investments. The main types of intermediaries in the UAE include:

• Licensed Brokerage Firms: These firms provide platforms for trading securities on UAE exchanges like the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX), as well as international markets. Examples include ADCB Securities, Al Ramz Capital, and Emirates NBD Securities.
• Online Brokers: International platforms such as eToro, Interactive Brokers, and Saxo Bank offer online trading services, providing access to a wide range of global financial instruments.
• Wealth Management Firms: Banks like HSBC, Citibank, and Emirates NBD offer wealth management services, including personalized investment advice and portfolio management.
• Robo-Advisors: Digital platforms like Sarwa provide automated investment services, creating and managing portfolios based on your risk tolerance and investment goals.
• Islamic Financial Institutions: Institutions such as Dubai Islamic Bank and Abu Dhabi Islamic Bank offer Shariah-compliant investment products and services for investors seeking to adhere to Islamic finance principles.

Each intermediary offers different services, fee structures, and investment options. It's essential to research and compare these intermediaries to find one that aligns with your investment objectives and preferences.

What to Invest in on the Stock Market?

The UAE offers a diverse range of investment products, catering to various risk appetites, return expectations, and investment horizons. Whether you're a conservative investor seeking stable income or a growth-oriented investor aiming for higher returns, the UAE's financial markets provide multiple avenues to achieve your financial goals.

Stocks

Investing in stocks means purchasing shares of publicly listed companies, making you a partial owner. In the UAE, major stock exchanges include the Dubai Financial Market (DFM), Abu Dhabi Securities Exchange (ADX), and NASDAQ Dubai. These platforms list prominent companies such as Emaar Properties, Emirates NBD, and First Abu Dhabi Bank.

Our Take

Stocks are suitable for investors willing to accept market volatility in exchange for potentially higher long-term returns. Diversifying across sectors and geographies can help mitigate risks.

ETF (trackers)

ETFs are investment funds traded on stock exchanges, much like stocks. They typically track specific indices, commodities, or sectors. In the UAE, options include the iShares MSCI UAE ETF, which provides exposure to a broad range of UAE companies, and the Chimera S&P UAE UCITS ETF, focusing on Shariah-compliant investments.

Our Take

ETFs offer a cost-effective way to achieve diversification and are particularly suitable for passive investors seeking exposure to specific markets or sectors.

Mutual Funds

Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They are managed by professional fund managers. In the UAE, banks like HSBC, ADCB, and Citibank offer a variety of mutual funds, including equity, bond, and balanced funds.

Our Take

Mutual funds are ideal for investors who prefer a hands-off approach, relying on professional management to navigate the markets.

They are suitable for medium to long-term investment horizons.

Bonds (Government & Corporate)

Bonds are fixed-income securities where you lend money to an issuer (government or corporation) in exchange for periodic interest payments and the return of principal at maturity. The UAE government issues Treasury Bonds (T-Bonds), and corporations like ADNOC have entered the sukuk (Islamic bond) market.

Our Take

Bonds are suitable for conservative investors seeking regular income and capital preservation. They can also serve as a stabilizing component in a diversified portfolio.

How to invest in the stock market when you are a beginner?

More and more young people are getting started in stock market investing today, but there is no age limit to start in this field. However, as a beginner investor, it is necessary to take some precautions before getting started.

• The simplest solution is to entrust the management of your investments to a third party whose job it is, such as a financial advisor, or to software specially developed for this purpose, such as a robo-advisor.
• It is also possible to make your own investments in the stock market, but in this case, it is preferable to take the time to train and take an interest in how the markets work before starting to invest your money.
• As an investor does not become profitable overnight, it is also preferable to not invest money in the stock market that you may need to live on or to meet unforeseen expenses.
• Similarly, it is necessary to put in place a precise investment strategy and ideally in the long term by setting achievable objectives and taking risk into account.

When to Invest in the Stock Market?

While it's possible to make investments in the stock market at any time, it's necessary to identify the right opportunities before buying securities. To know if it's the right time to buy one or more stocks in the stock market, you need to ask yourself these simple questions:

• What is the current economic situation? Is there growth, or are we in a period of crisis?
• What level of risk are you willing to take? An investor with a high-risk appetite will frequently find interesting opportunities in the stock markets, while a cautious investor will prefer to wait before investing.
• What is a listed stock really worth? The intrinsic value of companies listed on the stock exchange must be defined in order to know if it is the right time to acquire their shares.
• When does the company pay its dividends? Finally, if you have opted for a yield strategy with stocks that pay a dividend, you must hold these stocks no later than the day before the ex-dividend date.

Why Invest in the Stock Market?

Investing in the stock market offers numerous advantages for growing your wealth, protecting your capital against inflation, and diversifying your income streams. Here are the main reasons to invest in the financial markets:

• Grow your savings in the long term: Historically, stock markets have generated attractive returns over several decades. Regular, long-term investment allows you to benefit from the growth of companies and the economy.
• Protect your capital against inflation: Uninvested savings lose value over time. By aiming for a return higher than inflation, the stock market makes it possible to maintain, or even increase, the purchasing power of your capital.
• Generate passive income: Some stocks pay regular dividends. Bonds pay coupons, offering a stable income to the investor.
• Diversify your assets: The stock market makes it possible to supplement real estate investments or secure savings products.
• Good diversification reduces exposure to a single type of asset or risk.
• Easily access global markets: With online brokers and ETFs, it is possible to invest in thousands of companies around the world. This allows you to position yourself in different sectors, geographic areas and levels of economic development.

Good to know

The stock market is a powerful tool for investors willing to adopt a long-term vision. Well managed, a stock portfolio can become a lever for sustainable growth and a pillar of your wealth strategy.

Which broker to choose for investing in the stock market in the United Arab Emirates?

To invest in the stock market, it is essential to go through an approved financial intermediary, called a broker. They transmit your buy and sell orders on the markets. The choice of broker directly influences your investment experience, the fees you will pay, the products available, and the tools at your disposal.

Here are the main categories of brokers available in the United Arab Emirates, with their characteristics:

Expert's Opinion:

• An independent investor who wants to diversify at a lower cost will prefer an online broker.
• An active trader will opt for a CFD broker, being aware of the risks.
• A beginner or long-term saver will prefer automated management with a robo-advisor.
• Finally, a cautious profile or one attached to their bank will use a bank broker, despite higher fees.

How much money do you need to invest in the Stock Market?

The amount of money needed to invest in the Stock Market will depend on various factors, especially your personal financial situation. Here are the rules to follow if you want to get started:

• Invest a portion of your savings in the stock market: It is important not to put all of your savings into your stock market investments. You should keep some of your savings to use in case of need. Ideally, and if you can, keep 20% of your capital in a secured investment or a classic savings vehicle and invest 80% in the stock market.
• Invest in the stock market with a small budget: It is entirely possible to invest in the stock market with a small budget. It is not necessary to have a large capital to start building a stock portfolio. AED 2,000 to AED 4,000 will be enough to create the basis of it, and you can then reinvest your income from dividends or capital gains to buy new securities.
• Don't put all your eggs in one basket: While the stock market is attractive in terms of returns and investment, it is necessary to properly allocate the money you invest in the stock market, ensuring that your portfolio is diversified. For example, you can invest a portion in stocks, another portion in one or more funds, and another portion in bonds.

Investing in the Stock Market with a Small Budget: Our Tips

If you are a beginner investor and want to invest small amounts in the stock market, you have two solutions:

• Invest your current savings: this is possible from AED 2,000
• Invest a small amount each month : you can also freely make payments to your stock market investment accounts, such as a securities account, to gradually fund it.

What are the taxes on stock market investment income in the United Arab Emirates?

The United Arab Emirates (UAE) offers a highly favorable tax environment for investors, characterized by the absence of personal income tax and capital gains tax for individuals. This makes the UAE an attractive destination for both local and international investors seeking tax-efficient investment opportunities.

1. Taxation for Individual Investors

For individual investors, whether UAE nationals or expatriates, the UAE does not impose taxes on investment income. This includes:

• Dividends: Income received from dividends is not subject to taxation.
• Capital Gains: Profits from the sale of stocks, bonds, real estate, or other assets are generally exempt from taxation.
• Interest Income: Interest earned on savings accounts, bonds, or other financial instruments is typically tax-free.

This tax-free regime applies to personal investment activities and is a significant advantage for individual investors residing in the UAE.

2. Taxation for Corporate Investors

As of June 1, 2023, the UAE has implemented a federal corporate tax (CT) regime. Under this system:

• Corporate Tax Rate: A standard rate of 9% is applied to taxable income exceeding AED 375,000.
• Exemptions: Certain types of income are exempt from corporate tax, including:
• Dividends and Capital Gains: Income earned from qualifying shareholdings may be exempt under the participation exemption, provided specific conditions are met.
• Intra-Group Transactions: Qualifying intra-group transactions and reorganizations are not subject to corporate tax, given that necessary conditions are satisfied.

These provisions aim to maintain the UAE's attractiveness as a business hub while aligning with international tax standards.

3. Considerations for International Investors

While the UAE does not tax personal investment income, international investors should be aware of tax obligations in their home countries. Many countries tax their residents on global income, which may include income earned in the UAE. To mitigate double taxation, the UAE has entered into numerous Double Taxation Avoidance Agreements (DTAAs) with other nations. These agreements can provide relief by allocating taxing rights and preventing the same income from being taxed in both jurisdictions.

In conclusion, the UAE's tax regime offers significant advantages for investors, particularly individuals, by providing a tax-free environment for various types of investment income. Corporate investors can also benefit from exemptions under specific conditions, making the UAE a competitive and attractive location for investment activities.

Our 5 Tips for Smart Stock Market Investing

Now that you know the basic rules of stock market investment, here are five simple tips to follow to quickly become a profitable investor:

• Set achievable goals: Every investor should set financial goals for their various investments. These goals will depend on the objective of the investment. Is it to prepare for retirement, finance a purchase, or a specific project? A motivating goal will be a driving force that allows you to dedicate yourself to your investment with passion.
• Learn about the stock markets: Good knowledge about the stock markets and how they work is essential if you want to make profitable investments. So take some time each week to inform yourself and train yourself. There are many online training modules that allow you to learn analysis methods, and you can also consult targeted financial news feeds.
• Prefer a long-term investment horizon: Unless you are an expert in the financial markets and want to speculate in the short term to generate maximum profits in a short time, it is more prudent to invest with a long investment horizon. Speculation presents many risks that you can avoid with progressive investment.
• Know your risk tolerance: You must define as precisely as possible the level of losses and variability of your capital that you are willing to assume. Remember here that the higher the potential return of an asset or market, the higher its level of risk will be. A strong aversion to risk should direct you towards the least risky instruments such as bonds or certain secured funds. If you have a high tolerance for risk, you can try riskier investments such as stocks or https://hellosafe.fr/investissement/crypto-monnaie/prometteuses.
• Don't let your emotions take over: Finally, investing in the stock market is an activity that can generate a whole host of emotions such as stress, infatuation, or fear. A good investor must not let these feelings lead them to make bad decisions and must always keep their initial strategy in mind and stick to it.

Do you want to invest in the stock market on your own and independently? Join a quality online broker without delay and start placing your orders on the market.

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P. Laurore

Finance expert

Co-founder of HelloSafe and holder of a Master's degree in finance, Pauline has recognised expertise in personal finance, which she uses to help users better understand and optimise their financial choices. At HelloSafe, Pauline plays a key role in designing clear, educational content on savings, investments and personal finance. Passionate about financial education, Pauline strives, with every piece of content she oversees, to provide reliable, transparent and unbiased information for independent and informed financial management. To this end, she has tested over 100 trading platforms to help internet users make the right choices.