If you are an Egyptian living abroad and looking for a way to financially secure your future, there are a few paths you can take: from certificates of deposit and high interest savings accounts to real estate investments, each with their own unique set of opportunities and risks. But what if you are thinking about investing in the stock market back home in Egypt?
The Egyptian Exchange (EGX) has been encouraging Egyptians living abroad to invest in Egypt, with the EGX recently partnering with the Ministry of Emigration and Egyptian Expatriate Affairs to promote investing in Egypt to Egyptian expats.
The Egyptian Streets team sat down with EGX Executive Chairman Mohamed Farid to ask some of the questions you might have about how you can make such an investment from your home abroad, what you need before you start, and what your options are as a first-time investor. Here are some of the key answers he gave.
You don’t need an Egyptian bank account
While it definitely would not hurt you to have a bank account in Egypt, Farid confirms that it is not a prerequisite for investing in the EGX.
A bank account in your country of residence is enough, and it would be an added bonus if the chosen bank has a branch in Egypt. Farid does, however, tell us that if you do not have an Egyptian bank account, you have to have an account with a brokerage house under your name as the investor, which would allow you to take out money with your name.
Editor’s note: Brokerage houses are specialized businesses that have elaborate expertise in the stock market, and a staff that is trained to handle the different activities related to trading in stocks.
These businesses offer their services to investors and potential investors who do not have the knowledge, expertise, or time to manage their stock market investments by themselves. In other words, they are entities that mediate between the investor and the stock market, guiding investors who are unsure of how to make the best of the money they have and to make the most beneficial decisions.
In Egypt, a few brokerage houses that work with Egyptians abroad and foreigners include Hermes Securities Brokerage, Beltone Securities Brokerage, and Cairo Capital Securities.
Investing in stocks is a strong alternative to just leaving your money idle in a bank
Farid says that the goal of anyone making investments is likely to be securing enough wealth to one day stop working and not worry about income after retirement. While certificates of deposit and high yield saving accounts are safe investments made very commonly, he further explains that due to the slightly higher risk, on average, investing in the stock market yields higher returns than fixed income investments such as collecting interest from money deposited in the bank.
And if you diversify your investments – that is: invest in shares from different companies- there will be less of a risk of being affected by the fluctuations in the market. For stock market novices, the best way to do this is by investing in exchange traded funds. Which takes us to the next fact.
If you are a beginner, your best bet are exchange traded funds (ETFs)
If you are looking to invest in the EGX, but you do not have the knowledge of an experienced trader, Farid recommends exchange traded funds (ETFs), which he describes as ‘vehicles for incremental savings’.
ETFs are financial institutions that raise funds from individual investors by selling their shares, and subsequently use those funds to invest in different financial assets (stocks, bonds, securities, and even, in some cases, commodities), utilising its expertise and financial depth to provide value to its own investors.
In Egypt, most of these funds are found in banks, as they provide the experience the layman lacks, and can be relied on to identify good investment opportunities. You can visit the EGX webpage to know more about the opportunities and risks of ETFs.
Editor’s note: The difference between ETFs and directly investing in shares is that ETFs do the investing for you, so you do not have to trade directly in the stock market. Instead, you purchase units of the ETFs which are made up of a large portfolio of shares. ETFs can sometimes also have specific themes: ranging from ETFs with investments in only sustainable companies to others which focus on technology shares.
You can benefit from Egypt’s economic growth
Another point Farid highlighted is that if you opt to invest your money in the EGX, you will have an opportunity to benefit from the consistent growth of the Egyptian economy.
In July 2021, a Reuters survey predicted the Egyptian economy to grow by 5 percent over the coming 12 months. Bloomberg further reported that in spite of the COVID-19 pandemic, Egypt was among the top 10 emerging economies in 2020. Such growth reflects in investments made in the stock exchange, and will result in better returns.
There are no restrictions on sending money back to your country of residence
If you are living outside of Egypt, you will without a doubt want to make sure that the money you make from your investments can come back to you to your country of residence.
Farid tells Egyptian Streets that as long as that money is being transferred through the official routes, which means within the banking sector, there should be no problems. Importantly, if you invest through a brokerage house, they will normally take care of all transactions and necessary measures that must be taken.
There are many ways to get all the information you need to stay up to date on the Egyptian markets
For Egyptians living abroad, it can sometimes be a challenge to stay up to date on all the developments of the Egyptian market. But as an investor in the EGX you will not want to miss a beat.
Your first source of information, Farid says, are brokerage houses. If you are investing or looking to invest, seeking them out and asking them your questions is a great start.
Another sure way to learn the latest is the EGX website itself, which provides an online platform with news, stats, and information for investors, both current and potential.
If you are going to invest in the EGX, do it sooner rather than later
Egyptian Streets’ final question to Farid was what advice he would give to someone about to invest in the stock market for the first time. His answer was to do it quickly. The sooner you invest, the higher the value of the reward you reap will be.
If you want to find out a bit more, you can watch our interview with Dr Farid
The video provides more information about investing in the stock market and what EGX is doing to increase financial literacy in Egypt.
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