If you live or plan on moving to Dubai or the UAE, and are wondering how to cost-effectively invest in stocks, ETFs, bonds, and other securities, you have come to the right place.
In this guide, we are covering in detail all your trading options as a UAE resident.
Traditional Banks
If you are located in the UAE, you will most likely already have a local bank account, be it a personal bank account or a company bank account. All major UAE-based banks including Mashreq, Emirates NBD, FAB, and RAK Bank offer stock and bond trading right from your bank account.
An advantage of using a local bank is that you can keep your transfer fees low (you won't need to transfer funds to external brokerage accounts), and have access to UAE-based stocks.
Stocks traded on the Dubai or Abu Dhabi stock markets are highly regulated, and you will only be able to buy them through a UAE-based bank brokerage account.
In addition, you will need to apply and get approved as a "registered investor" to buy UAE-based stocks. We can assist you will all of that.
Another upside of trading through a UAE bank is the ease of estate planning. Every country you invest in, and keep cash holdings in, usually requires a separate will. So if you use a US-based brokerage account and hold cash in it, you may need a separate will and could be liable to pay US inheritance taxes. We are experts at dealing with complex multi-country estate plans for UAE residents. Check out our services here.
The major downside of using UAE banks to trade stocks and securities is the relatively higher trading fees in international markets. If your trading volume is high, these fees will diminish relative to your stock investments, but they will still be higher than with foreign stock brokers.
(Foreign) Stock Brokers
Stock brokers like Saxobank.com and Interactive brokers offer more competitive trading fees as compared to most banks.
Stockbrokers, most of which are not UAE-based, usually do not allow you to trade in UAE stocks, however, they make up for it with a much wider selection of international securities.
In order to trade through a stockbroker, you will need to open an account with them and transfer funds over from your bank account.
In order to trade in foreign stocks, you will need the currency the stocks are traded in. That could be US Dollar, British Pound, or Euro.
If you already have said currency in your UAE bank account, you can simply transfer it over.
If you do not have the required currency you may exchange and transfer it through your bank (which is expensive) or through an exchange house like www.currencyfair.com (relatively cheap). Unfortunately, the exchange house Wise (formerly known as Transferwise) does not operate in the UAE anymore so you cannot use it to transfer money out of the country.
Alternatively, if your stockbroker accepts foreign currency holdings, you may be able to transfer foreign currencies over to your broker, who then exchanges them at a more reasonable rate.
Interactive Brokers, for example, accepts AED.
The main disadvantage of using a stockbroker is the complexity of the resulting inheritance issues. Interactive Brokers is based in the US and Saxobank is based in Denmark.
If you keep cash in those accounts, it may not be covered by your UAE will.
The solution, in this case, is to set up a multi-country will structure. This is one of the services we specialize in here.
Trading Apps (CFD Brokers)
The probably best know option to trade is "trading apps". One company that has been heavily advertising in the UAE and specifically Dubai is equiti.com. One of Dubai's metro stations was even renamed after the company.
The problem here is that many of these trading apps or services do NOT offer traditional stock, bond, and ETF investing. It just looks like it on the surface.
Apps like equiti.com are only offering CFDs (Contracts for Difference) of stocks, ETFs, etc.
These CFDs are bets on whether an underlying asset increases or decreases in value. Buying a CFD is not a long-term investment strategy, and is much riskier!
Other brokers that look like traditional stock brokers but in reality are only offering CFDs are CMC markets, IG.com and FX Pro.
These services are highly speculative - so remain cautious that you are not accidentally opening a trading account with a CFD broker rather than a traditional stock broker!
Conclusion
Opening and maintaining a stock and securities investment portfolio is a prudent path to long-term financial success. Depending on what you are looking to invest in, it is important to consider the main two alternatives, traditional banks, and foreign stock brokers.
If you are looking for more support in this regard, check out our investment strategy services. We are experienced in developing strategies that help you avoid inheritance taxes, capital gains taxes, and dividends taxes in international markets.
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