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There are many platforms out there that allow you to

buy stocks and funds with more appearing every week. Account

minimums and trading fees are rapidly falling towards zero, which

means you can start using these platforms with very little. However,

there is some platform risk that the company you used to

invest with implodes spectacularly and takes your money with it.

We've seen this particularly in crypto with platforms like FTX.

The risk of stock platforms is lower,

but it's still there. Be careful with new or cheap

platforms,

especially if you get really into investing and start to

keep a significant part of your wealth with one institution.

The worst way to invest is through an insurance wrapper

such as a savings plan or a whole life insurance plan.

You commit to paying a certain amount each month which

is unlikely to be less than $100 and then you

get stung with fees,

hidden fees as high as 4%, until you give up.

Just don't get one of these awful plans and learn

how to use a robo-advisor or international brokerage instead.

I've always felt using banks to buy mutual funds or

stocks was quite an expensive option, though some of them

are introducing low-cost offerings now. With one UAE bank, if you

have a salary of at least 15,000 dirhams, you can

invest as little as $1 into mutual fund offerings. But,

when you look at the fee details and I always

insist that you do this,

there are multiple layers of fees that stack up. A

300 dirhams registration fee, then a 1% transaction fee every

time you invest, then a platform maintenance fee of 1%

every year if you have more than 10,000 dirhams and

15 dirhams a month if you have less than that.

So if you invested 1,000 dirharms, you

would pay about 515 dirhams in fees which is over

50%! Not worth it. If you invest 10,000 dirhams,

you pay 525 dirhams in fees, which is about 5.3%.

And if you invest 100,000 dirhams, you pay 2,415 dirhams

which is 2.4%.

So yes, you can invest small amounts but you don't

get a good deal and frankly, even with larger amounts,

you're still way over my 1% total fee limit.

That's why I don't like mutual fund investing.

Other banks have introduced brokerage apps for stocks and

ETFs and these are quite good value. One has a

minimum deposit of $500,

there is a trading commission of 0.5%

per trade which is ok,

but some other brokers are 10 times cheaper.

Then there's also a custody fee to keep your investments

safe, of 0.1%

per year. Overall, it's not a bad deal,

but there's another factor to consider.

What if the bank hit hard times during recession and

went bust? What if your cash savings were also with

that bank?

There's no government protection for individual accounts and a bank

combined with a brokerage is quite a complicated beast

to sort out if it does go bust. Just Google

Lehman Brothers. If you want to invest but you feel

like you need a bit of support, then you

can use a robo advisor where they pick a portfolio of passive

index funds for you based on a survey of your

risk appetite.

This is a great low-cost way to get started.

One robo-advisor in the UAE allows you to get started with

$5 and no advisory fee for a year,

so you only pay the fund managers charge for your

ETFs of about 0.1%

per year. After a year or so, you pay 0.85%

advisory fee per year up to a portfolio of below $50,000.

This is probably one of the best and cheapest ways

to get started then when you feel more confident in

managing your own money, you can always move to another broker

and say goodbye to the advisory fee.

There are hundreds of brokers out there,

but beware, some of them don't accept people living in

the Middle East or don't accept expats. Some only give access

to stocks and ETFs from US stock exchanges, which is

fine when you are starting out,

but can expose you to estate taxes of up to 40% of

your portfolio if you die with more than $60,000.

Other brokers also trade their own money to make

a profit and those are much more likely to go

bust so avoid them.

Then, you have the brokers that don't charge anything to

make a trade and buy stocks or ETFs. That sounds

good on paper and probably is good when you're starting out,

but you have to ask yourself.

How do they make their money? Maybe the prices

you see when you trade aren't really the best prices

out there?

My favourite broker charges between $2 and $5 for any

trade under $10,000

and then that's the only cost you have. It's super

cheap while also being huge and secure. Beware the fees

of other brokers: Some have a minimum deposit of $10,000,

some charge $20 to $40 per trade, several have inactivity

fees so if you don't trade every month you could

get hit for $15 a month or even the $150

every six months. These minimum fees are based on dollar amounts

rather than percentages.

So if you're only investing a small amount per year,

your investment could get completely chewed up by these fees.

The choice of platforms can be overwhelming.

Just get started somewhere and then as your confidence grows,

it's very easy to switch to another cheaper or more

robust platform.