As part of its investment awareness program, the Securities and Commodities Authority (SCA) held two seminars on the mechanisms for capital market operations in Abu Dhabi and Dubai. The seminar was given by Soha Hanafy, a Senior Financial Analyst at the SCA Research and Financial Analysis Section.
The first seminar reviewed the benefits of capital markets in terms of providing governments and corporations with the appropriate funding to achieve their ends and expand their activities, which will in turn benefit the entire economy, especially when it comes to stimulating positive growth, creating employment opportunities, guiding individuals to invest savings in instruments with sufficient liquidity to make lucrative returns, efficiently allocating economic resources to their best use, providing funding for sectors in financial deficit, setting fair asset prices, and mitigating the impact of inflationary pressures that may result from relying on banking resources.
The seminar also reviewed the objectives of investing: saving money for future use and providing an additional source of income, or securing essential needs, and compensating for the inflationary impacts on savings caused over time.
The seminar detailed mechanisms for the operation of investment portfolios; steps to build portfolios; the significance of clearly identifying the investment policy through inputs from investors, which are the objectives of investment returns; risk handling; and other investment determinants, notably the required liquidity, the time period available, and how investment assets are distributed in the portfolio on various asset categories.
Hanafy addressed various asset types, starting with shares. She explained the distinction between primary markets and secondary markets, share returns, and the most important factors impacting them and their method of calculation. Hanafy addressed the difference between government bonds and corporate bonds, bond returns, as well as types of mutual funds and their investment advantages and types of commodities and how to invest in them, directly or indirectly.
The seminar indicated the importance of understanding the relationship between risk and return to better develop the investment strategy while focusing on three main principles that investors must bear in mind at all times: the relationship between risk and return is positive, investors vary in their willingness and ability to handle risk, the significance of diversifying portfolio investments as diversification minimizes risk, compensating for the bad performance of some investments, and diversifying return sources. Hanafy also conducted a comparison of investment risks and returns and various assets.
Furthermore, the seminar addressed how to calculate returns on each investment instrument and the portfolio as a whole, in addition to trading requirements and mechanisms, explaining the significance of financial indicators and how to interpret them. Hanafy concluded by offering investors some important tips and reviewing the SCA role in regulating and overseeing the markets, protecting investors, and enhancing investor awareness .