A beginner’s guide to hitting the stock market
Greed is good. The infamous words of Michael Douglas in “Wall Street sparked a monetary-cultural revolution. It was no longer vulgar to wallow in your money. In fact, you were an assertive go-getter now, respected and admired for your tenacity in chasing the buck.
Egypt is now in the middle of an economic boom. The outlook for the economy is great, foreign investment is at its highest levels and expected annual GDP is north of 7 percent.
All this has had a positive effect on the Egyptian stock exchange, which has out-performed other stock exchange markets in recent years. Emerging markets provide very high returns since the risk factor is high and so it is ripe for speculation.
If you want a piece of this big pie and are debating whether to enter the market as an investor, here are a few steps and tips:
Before entering the stock market, it is extremely important to fully grasp the risk factor involved i.e. know your limitations. Learn to accept your losses before your gains, so draw up an expectation of what you might be willing to lose and this will help you survive the tumultuous waters of the market.
Find yourself a good broker. Set up with a reputable brokerage firm. Notable firms include CIBC, EFG-Hermes, Pioneers, Dynamic Securities and Prime amongst others.
Usually firms have a minimum amount that you must put up for investment. The bigger the firm, the bigger the required threshold. Smaller firms will require a minimum of LE 25,000 while the bigger fish expect at least LE 100,000.
Basically, any investor in the stock market will be given a Unified Code. This is an individual unique number which is your identity on the exchange system. The firm you first set up with will provide you with this code.
This however doesn’t mean that you, as an investor, are limited to dealing with only one brokerage firm. In fact, you can have accounts with all of them simultaneously if you so desire.
When you set up with a firm, you will be assigned a custodian, which is a bank that will hold your shares for you. They are responsible for holding the shares you possess.
In case of selling, your brokerage firm cannot sell your shares without the approval of your custodian (this is known as blocking the shares). This is to prevent the selling of shares you do not actually own. The role of the custodian in the transaction is to prove that you actually possess these shares you intend to sell.
This is known as short-selling, a common market instrument abroad still not available in the Egyptian market.
You now have a broker, a unified code and a custodian. You may now enter the market.
Sit down with your broker before making any investments so he/she can figure what kind of investor you are. Are you in it for short term gain or for the long haul? Are you risk-aversive or risk-assertive? And this will enable your broker to give you the best possible recommendations for your preferences and situation.
Alright, you’re now in the market, it’s you and your broker.
Let the good times roll.
