Finsbury Spotlight - September Edition

SEPTEMBER EDITION

A View from the Top INSIDE THIS ISSUE

DANIELLE SUCHLEY Should I pay off my
mortgage?..........................2 & 3
MANAGING DIRECTOR, BLUE SKY THINKING GROUP Market Data.............................4
First Aid Training....................5
Welcome to the September issue of Finsbury Spotlight! Welcome back to everyone Employee Spotlight .................6
returning back to Dubai after the school holidays, and Eid Mubarak to you all! Wishing
you and your loved ones peace, joy and prosperity. SPECIAL POINTS OF
INTEREST
It’s been a busy few weeks for us here at Finsbury, not least because we’ve had so many
people travelling around. • Should I pay off my mortgage
or should I leave my money
Last month I attended the Tony Robbins Business Mastery conference in Las Vegas. For invested?
those of you that know him, the man needs no introduction. For anyone who does not, I
suggest you look him up and read one of his books - he is an entrepreneur, author, and • How to get first aid certified
Life and Business Strategist. He looks at the psychology of leadership, negotiations and in the UAE
organizational turnarounds, and has served as an advisor to leaders around the world for
more than 38 years.

The whole week was an amazing experience and I would definitely recommend it to
anyone that owns or runs a business. There are some very exciting ideas bubbling around
in the Blue Sky Thinking Group, so watch this space!

I hope you enjoy this issue and look forward to speaking with you all next month!

SHOULD I PAY OFF MY MORTGAGE?

This is a question we regularly get asked by clients and came across this example which we thought would be
useful to share with everyone. It is rather technical but we have tried to simplify it to make it easy to
understand.
Let’s look at the example— if you bought on the low end of the UAE market at 650,000 AED
(roughly 176,000 USD), would you be better off paying everything upfront or taking out a mortgage? In this
example we look at what would happen if you invested the extra capital instead of fully paying off the property.

Assuming a 20% deposit is put down, you would need to take out a mortgage for $140,800— let’s say we
have a term of 15 years and are to be charged an interest rate of 3.25%.
If you run the numbers, almost 3 years into the mortgage, this client would have paid $11,355.97 in interest
payments. Seems like a lot!
That is $11,355.97 that he’ll never see again. This isn’t small change. It hurts a little. But wait, there is
something interesting to look at.
Here is a chart showing
how the markets have
performed since the
mortgage started.
If $1 had been invested at
the start of the mortgage, it
would be worth $1.24 at
this point. So let’s apply
this performance to
the $140,800 that was
invested:

140,800 * 1.24 = $174,592
That’s growth of $33,792! ($174,592 minus the original investment of $140,800). The interest payment
of $11,355.97 isn’t so painful now, is it? Another way to consider the numbers is to compare them with the
total amount that will be paid in interest:

Over the course of the 15
year mortgage, he will
pay $37,284 in interest.
However, less than 3
years into the mortgage,
he’s up $33,792 on the
invested money. There is
a good chance of breaking
even before the loan is
even 5 years old.

2

BUT WAIT, IT GETS BETTER

The recent performance of the
stock market has not been
anything spectacular. If we go
all the way back to 1900 there
has been an average return
of 9.54%. The performance of
the markets in the last few
years, 7.98%, is actually below
average.

However even with this recent
subpar performance of the
markets, this client would have
made almost 3 times more
money from the investment
than that paid in interest.

BUT WAIT, IT GETS EVEN BETTER

As great as the numbers look now, they will probably look considerably better down the road for two reasons:

1. MORTGAGE INTEREST DECREASES OVER TIME

The earlier you are in a loan, the more you’re paying in interest. This is how all loans work. The first full year of the mortgage,

over $4,000 is paid in interest:
2. COMPOUND INTEREST IS WORKING FOR YOU
Your invested money works in
the opposite way of the
mortgage interest. Dollars
reproduce like rabbits. Over
time, those little guys
will multiply like mad.
In the next calculation, I
used a very modest return
of 6%. Despite that
conservative number, the
results are incredible. You
would earn $196,635.41!

SO SHOULD YOU PAY OFF THE MORTGAGE?
Let’s review the numbers: On the mortgage of $140,800, You’ll pay $33,792 in interest over 15 years. If you earn
just 6% on the investment, that $140,800 turns into $337,435.41 over the same period of time. This is a gain
of $196,635.41. You don’t have to be a math genius to know that $196,635 beats $33,792 hands down.

THIS MONTH IN THE MARKETS MARKET UPDATE FOR
SEPTEMBER
GLOBAL EQUITY: The S&P 500 saw a boost from upbeat economic data
releases and notched its fourth positive week, the longest streak in three months, FTSE 100: 7,411.47
ahead of the Labor Day holiday. Meanwhile, European markets, as measured by
the Stoxx 600 Index, managed to shake off DOWJONES: 21,987.56
NASDAQ 6,435.33
North Korean geopolitical tensions by rebounding from their 6-month low by
0.6%. The Japanese TOPIX also rallied, driven by the Bank of Japan’s (BoJ) SMI 8,864.46
Exchange Traded Fund (ETF) purchases. HANG SENG 27,697.45

FIXED INCOME: While digesting concerns over military tensions in the Korean SENSEX 31,769.53
peninsula and mixed estimates of damage from hurricane Harvey, US 10-Year
Treasury yields hit a 9-week low in the middle of the week and closed on Friday at GBP:USD 1.29
2.16%. Also down were German 10-Year Bund yields, which recorded their largest GBP: EUR 1.09
monthly decline in 6 months, as demand rose for safe-haven assets. GBP: AED 4.75

INFLATION: There were no surprises from US inflation as July headline PCE
rose 1.4% year-over-year (yoy), meeting consensus expectations. In the Euro area,
August HICP inflation rose to 1.5% from 1.3% in July, slightly stronger than
market expectations. An increase in Euro denominated international oil prices
contributed to the minor upside

surprise.

MANUFACTURING: August’s ISM manufacturing index rose by 2.5 to a 6-year
high of 58.8 and well above consensus expectations. The index has also been
above 50, indicating expansion in the manufacturing sector, for its 12th
consecutive month.

FX: So far this year, the US Dollar index (USD) has been experiencing its longest
ever streak of weakness amidst evolving market expectations for monetary policy
globally as well as political gridlock in Washington. For the week, the index was
mostly unchanged, bringing its year-to-date returns to -9.3%. The Euro traded up
against the USD early last week,

breaching $1.20 for the first time since January 2015. We believe the exchange
rate will remain mostly range-bound

COMMODITIES: WTI crude was down 1.2% over the week, continuing to trade
at a discount to Brent, with the two benchmarks hitting their widest spread since
2015 as traders have continued to bet on refining disruptions from hurricane
Harvey. The US Department of Energy also put downward pressure on prices by
authorizing the release of half a million barrels of crude from the US Strategic
Petroleum Reserve.

4

WE ARE FIRST AID
CERTIFIED!

Last month saw the majority of our team get certified to perform first aid by our
sister company Safe Hands. So next time you sit down with your financial
advisor they will not only be able to help save your finances but also save your
life!
We’ve mentioned it before but Safe Hands has run over 300 courses, in the UAE,
to date. The courses are run by British qualified nurses with experience working
in some of the UK’s leading hospitals and include specialist pediatric care. They
offer certified one day first aid training courses in community locations as well as
courses for private companies and groups at locations of their choice.
If you are interested in booking one of these sessions contact:
[email protected]

5

EMPLOYEE SPOTLIGHT - LARA BENNETT

Name: Lara Bennett
Job title: Head of Legal
What do you do at BSTG ?
I head the legal department and deal with everything legal from the structure of the companies to
corporate governance.
Where is home?
Cape Town, South Africa
What is your favourite destination?
Italy
How long have you been in Dubai?
2 Years
What is your greatest achievement?
Having a judgement where I was the instructing attorney published in the South African Law Reports
What’s your favourite spot in Dubai?
Bab al Shams
Goals in Life?
1) Run a marathon
2) Complete a LLM (Masters in Law)
3) Travel

CONTACT US Address:

Finsbury Associates, Finsbury Associates/
Blue Sky Thinking Group
16th Floor, Ubora Tower
16th Floor Ubora tower,
Business Bay, Dubai,
United Arab Emirates

Phone:

+971 4 567 4500

Email:

client.services@finsbury-
associates.com