“Rule number one: never lose money, rule number two: never forget rule number one,” CEO of Berkshire Hathaway and the world’s third-richest person, Warren Buffett said.
What applies to Buffet’s $86 billion is the same as any person’s 10,000LE. Time, energy, and effort were spent to earn what we now consider savings, which makes it more difficult for us to decide on what we are going to do with our money. Deciding on where to invest your savings is never an easy task, as there are a lot of options that span from investing your money in a startup, the stock market, real estate, gold, in a bank, or even spending it all.
As they say, easy come, easy go. When something comes with difficulty, it becomes harder to let it go, which is purely applicable when it comes to money.
“The process of choosing a preferred destination for your savings is an investment choice that people make based on their preferences. You can start off by deciding whether to choose an investment that would generate income or an investment that would appreciate the capital gain”, Renaissance Capital investment banking analyst, Youssef El Sakka stated.
The banking option
VIA Mozo
“Risk is one of the most important aspects that investors should keep in consideration when they decide where they are going to place their money. Bank certificates are one of the least risky types of investments, as its potential losses are extremely minimal, and the interest rate in Egypt is really high in comparison to other countries,” El Sakka said.
According to the report “Egypt Interest Rate”, published by Trading Economics, The Central Bank of Egypt (CBE) decided in a meeting in July 2019 to set the interest rate on bank certificates of deposit to 15.75 percent.
“Recent research reports speculate that the CBE will decrease the interest rate by one or two percent in the first half of 2020. This is why it is recommended that people invest in bank deposits now, in order to take advantage of the current interest rate. Also, some people prefer to invest in foreign currencies as they believe that it has a stable outcome,” head of retail product and segment at a private bank, Mohamed Labib said.
Labib’s speculation proved right as an announcement by the CBE on Thursday stated that “the Monetary Policy Committee (MPC) has cut the Central Bank of Egypt’s overnight interest rate, overnight lending rate, and the rate of the main operation by 150 basis points to 14.25 percent, 15.25 percent, and 14.75 percent respectively.”
“Investing in foreign currency nowadays is not expected to yield, in counter, it may carry risks of losing investment value, as there is good accessibility to foreign currency in Egypt. The state is no longer under foreign currency pressure, as it maintains incremental foreign currency reserves, and foreign investments are coming in,” Labib stated.
“The US Dollar exchange rate is no longer increasing, it can decrease or even stay the same. This means that its value in comparison to the Egyptian Pound is decreasing, which makes it an unattractive investment,” he added.
Buying the yellow bars
VIA CNBC
While some may opt to keep their money safe and sound in banks, many traditional thinkers still prefer gold investments.
According to the article “8 Reasons To Own Gold”, Published by Investopedia, investing in gold could be a good move as it has an increasing demand, inflation hedge, and a deflation protection.
“There are some variables that determine the price of gold in Egypt. The first variable is the international price of gold, the US Dollar exchange rate, and the internal supply and demand of the Egyptian gold market, but it has a minimal impact on the price in comparison to the other two variables,” El Mawardy Jewelry Managing Director, Aly Ahmed El Mawardy stated.
Gold is like buying a stock as it is a commodity, and there is a misconception in Egypt that gold prices are only increasing, which is not true as it fluctuates, El Mawardy said. In 2011, gold prices reached around $1900 per ounce, and today the price fell to $1440. Also, in 2015, it reached around $1050, so from 2011 until 2015, there was a 45% decrease in the price.
“Egyptians feel that gold prices are increasing, due to the devaluation of the Egyptian Pound, as the exchange rate changed from LE6 to LE18, and then dropped to LE16.5. When it reached the LE16.5 exchange rate, people didn’t feel that the price dropped because international price increased,” El Mawardy added.
He believes gold is not an investment that will always make you money, it is a means of keeping value. If people want to invest their money in buying gold as jewelry, this is not a proper investment. On the contrary, what people should be doing is to purchase bars and gold coins.
Real estate
VIA Property Finder
A lot of people invest in real estate as it has a very high return on investment in Egypt, but it is one of the most risky types of investment, El Sakka claimed. This is because it is the most illiquid, because when you buy an estate you won’t be able to sell it quickly if you need to, as it is a big “sticky” investment.
“There is no liquidity in the real estate market, as developers are constantly increasing the installment period of the asset. This is one of the reasons that makes it more difficult for people to sell their assets at their asking price, as they will have to sell their assets at a discounted price,” El Mawardy explained.
However, if an investor aims to sell the estate purchased after a long time, real estate is one of the best options to invest in, Labib stated. This is because the Egyptian real estate market has proven that it can resist economic pressure.
“Real estate in Egypt is known for its ability to keep its value, although it is not as liquid as bank deposits. In addition, the future value of money affects the investment feasibility especially for long periods, more than five years for example, in comparison to the buying price,” Labib said.
Startups and SMEs
VIA MENAbytes
On the other hand, with the rapid increase of technological advancements, and the support of entrepreneurship in Egypt, some people decided to invest in startups or small-medium enterprises.
“When you decide on opening a startup, you have to decide whether your startup will provide services or products. Afterwards, you have to study the market that you are seeking to enter, the supply and demand, to see whether there is a shortage or a surplus in the market,” El Sakka stated.
“Establishing a business is one of the riskiest investments that anyone could take, because getting an idea is easy, but developing it and operating it is difficult. This is why investors have to dedicate their time and effort to develop their business, and eventually they might succeed,” he added.
