Last May, news circulated that the Egyptian Stock Exchange was launching a campaign to motivate young people to invest their savings on the stock market. This ambitious move was intended to open for youth new investment horizons that go beyond the familiar, traditional banking options which yield predetermined interest, such as savings accounts, time deposits, and investment certificates. The stock market would introduce youth to the world of shares and stocks and investment funds which yield variable interest depending on economic performance, financial situations, and growth rates.
I was wary when I first learned of this campaign. I saw it as targeting young people who presumably hold small capital and possess limited capacity to manage it. More often than not, young people tend to select banking options that offer stable interest, even if relatively low, instead of venturing into the world of the stock market where they face the unknown that ranges from possibilities of lucrative profit to devastating loss.
Granted, the Stock Exchange trades in shares and stocks of firms that operate in all fields of businesses and services. It is seen by many as a world for the wealthy and professionals; many among them tend to divide their money between bunches of investments covering a wide spectrum of risk. High risk investment offers the possibility of lucrative profit or huge loss; medium risk offers reasonable profit at a calculated, moderate risk; and safe investment guarantees a limited income at almost no risk. The net result of such fund allocation along the risk spectrum and versatile investment in money markets is a reasonable return on capital while avoiding unsustainable losses.
However, we must underline that many of the wealthy or venture capitalists who choose to invest their money on the stock market usually seek the expert services of professional money managers or brokerage houses, which they need and value.
Brokerage houses and money managers keep a close eye on all the firms and companies listed on the stock exchange, scrutinising and monitoring their performances and how they reflect on the value of their shares within the market law of supply and demand. Accordingly, stock market experts and brokerage houses are the best advisors regarding management of investment portfolios.
If this is how the money and investments of the more wealthy are managed, one can only imagine how imperative it is to connect the young people addressed by the Egyptian Stock Exchange with competent, expert advisors to protect their limited savings from the risk of loss. Especially given that young people who lose their limited savings to the stock market could see their dreams for the future shattered. I believe that the Stock Exchange administration must place a condition for all small investors and newcomers to the world of the stock market to deposit their savings with authorised money managers in order to avoid losing their money, and so that the Stock Exchange’s new campaign neither strays its way nor loses its raison d’être. I cannot sufficiently stress this, especially with the countless examples of investors who choose to gamble with their savings despite limited knowledge and expertise, thinking they have no need for expert advice and preferring to economise on commissions for authorised money managers. After achieving initial profits on their own, they more often than not end up falling prey to their lack of experience, and losing all their savings. So please mind the young investor.
Watani International
11 June 2021
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