A financial market refers to a marketplace where the creation and trading of financial assets such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources in the country’s economy. It acts as an intermediary between the savers and investors by mobilizing funds between them.
In the United Arab Emirates, there are two financial markets, namely the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM). ADX was set up on November 15, 2000 to trade shares of UAE companies. Apart from Abu Dhabi, it also has trading locations in Al Ain, Fujairah, Sharjah, and Ras Al Khaimah. The Abu Dhabi Securities Exchange is divided into four sectors: Banking Sector, Insurance Sector, Services Sector, and Industry and Hotels Sector.
Abu Dhabi Securities Exchange is considered the 35th largest stock market out of the 110 stock exchanges in the world. As of June 2019, the Abu Dhabi Securities Exchange's Market Capitalization has recorded a value of approximately AED 509 billion ($138 billion).
Launched in March 2000, the Dubai Financial Market has become one of the leading markets in the region. The DFM list of equities represents a broad range of economic sectors including major companies from transportation, real estate and construction, investment and financial services, banking, insurance, telecommunications, consumer staples sectors, etc. Just recently, it recorded a market capitalization value of AED 355 billion ($96.65 billion).
To invest in the financial market, any potential investor has to consider several tips. Firstly, ups and downs determine the amount of profit or loss. When you own a stock, you own a piece of that company, and as the value of that company increases, the stock price goes up. However, if the value of that company decreases, the stock price goes down. Secondly, when the company shares its yearly profits with its investors in the form of dividends, the stock price can go up or down dramatically for all kinds reasons and as a result, stocks are the riskiest types of investment in the investor’s plan. Thirdly, investors should take the financial analysis into account to make a sound investment decision. For example, price to earnings ratio and dividend ratio. Finally, investors have to examine the company’s financial structure, the quality of its management and whether it pays steady dividends.
However, there is a way to invest in the financial market that does not leave at risk of losing. Intelligent investors use true analysis to secure safe and steady returns in long-term investment. This is completely different from speculating, in which investors focus on short-term gains made possible by market fluctuation. Speculations are thus very risky, simply because nobody can predict the future precisely.