ECAM Investment Methodology

As there are a large number of new subscribers to ECAM who are unfamiliar with how I invest within the Provident Fund, I would like to take the opportunity to go over my methodology once again.

The first thing to understand is, over time, equities (stocks) have outperformed other "major" asset classes (bonds and cash) we have access to in the A and B accounts. As such, you want to have a pre-disposition towards investing in equities (given their superior returns) when the time is right.

However, there are times when equities underperform and other asset classes (such as bonds/cash) outperform. The key is to know when it is "right" to be in equities (to maximize your return ON capital) and when it is "right" to be in bonds/cash (to maximize your return OF capital). Technical analysis provides such insight.

My methodology of investing within the Provident Fund is based upon the following basic rules:

1) the Provident Fund is a very narrow, restrictive and limited investment fund. Given the opportunity, I would not hesitate to withdraw both my "A" and "B" account funds and manage them outside the boundaries imposed upon us by the administrators of the fund (and, as such, I would NEVER have funds in the "C" account due to the above restrictions), and

2) given that option 1 above is not possible given the mandate imposed upon us by the company (full withdrawal of the A and B accounts), I make the best of a bad situation by utilizing technical analysis to position the investment capital within the A and B accounts to maximize their limited potential return, and

3) all additional capital I invest I do so in my own personal "C account" outside the bounds of the Emirates provident fund to maximize return.

The bottom line is the Emirates Provident Fund was never designed (nor administered) to maximize your retirement income. It was designed to minimally satisfy the terms and conditions as laid out by the UAE government to comply with the terms of the "end of service benefit". As such, reliance upon the provident fund to provide for retirement is a serious financial mistake. Additional contributions you might make to the "C" fund are similarly doomed.

Based upon the above, here is the methodology I utilize to maximize the limited return potential of the provident fund:

1) A and B account accumulated account balances:

-I utilize technical analysis to move my existing capital between equities, cash and bonds.

2) Ongoing A and B account monthly contributions: (via our mandated 5% compulsory contribution and the companies 12%/15% contribution):

-I contribute 100% of my ongoing A and B account purchases monthly to equities divided as follows:

-Russell Global 90 fund: 40%
-BlackRock/MLIM Equity fund: 30%
-Fidelity International fund: 30%

The rational behind the above purchases is based upon the concept of dollar cost averaging (DCA):

As quoted from Investopedia:

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

Also referred to as a "constant dollar plan".

Eventually, the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.

For example,you decide to purchase $100 worth of XYZ each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four additional shares this time. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each.

In the U.K., it is known as "pound-cost averaging".

While the concept of dollar cost averaging has some detractors, I am a firm believer that using DCA in combination with strategic positioning of total assets utilizing technical analysis will provide superior returns within the limited confines of the Provident Fund.

3) Additional Funds available for investment:

All additional funds I invest in my personal brokerage fund account.


I strongly believe utilizing such a strategy over time will allow maximum return on capital within the Provident Fund A and B accounts.