Investment Alternatives: Looking Past Real Estate

CAIRO – 18 July 2018: Property has been, for sometime now, the most recurrent answer to the all too common question: Where should I invest? However, a growing move away from investing in property and toward the diversification of investment portfolios has recently gained momentum. From gold bars, bonds and equities, to vintage designer bags and classic; people have been searching for alternative investment opportunities.

The move away from property investment is typically associated with the hike in home prices, especially those in areas perceived as second homes, as a result of inflation, pound floatation and recent devaluation. Mona Aboud, founder of the Egyptian Arab Company for Modern Building & Reconstruction, says the price of property increased “because the cost of the material needed for infrastructure has swelled.”

“Four or five years ago, the price of steel was LE 3,600 or LE 4,000; today it ranges between LE 12,000 and LE 13,000,” Aboud says, adding “building materials come from abroad and the price for moving materials to Egypt has increased. Similarly, electricity has also become expensive everywhere around the world and so the production process is more costly now.”

Alternative investment opportunities provide chances for people to buy items they like that they can benefit from and make money as assets appreciate in value.

The hunt for gold

Seeking a more secure saving in the face of currency fluctuations and financial crises, Egyptian investors have been increasingly moving toward the gold market.

“A friend of mine first suggested it; he is an investment banker,” says Ahmed Taha, a mechanical engineer and businessman who saves his money in gold, not Egyptian Pounds, to safeguard savings against depreciation. “By doing this, I managed to save my money when the US Dollar was valued at LE 12, has I waited I would have lost even more of my money. Investing in gold gives you a hedge against inflation and currency devaluation,” says Taha.

Similarly, 26-year-old UK-based investment banker Nourhan Atef affirms that whilst keeping your money in a bank and getting interest in return is a conservative way to ensure you achieve sound returns, “keeping your savings in gold ensures that you are able to protect them against possible devaluations; at the very least, you retain your original amount,” she says. “However, you should actually make money off of this. Not only that, but you can also liquefy you investments very quickly with gold; this is the case with other kinds of alternative investments.”



Gold investment is also useful in countries that have taken a hit during the 2008 financial crisis, Atef says, as it protects their savings from the fragile banking systems. “Although this did not happen in Egypt, and will not, other countries have faced huge problems due to the 2008 crisis; and many people no longer trust banks in Greece or Cyprus, for example,” argues Atef.

Turning to more established businessmen, in a recent interview with Bloomberg, Egyptian billionaire Naguib Sawiris, who has made most of his money by investing in the telecom sector in Egypt, Iraq, Pakistan, Bangladesh and North Korea, revealed that he has put half of his $5.7 billion net worth into gold. Explaining the rationale behind his decision, Sawiris explained that gold is always a good investment during crises times as it secures the value of money. Gold is also a particularly good investment right now as it is expected to increase in value from just above $1,300 per ounce to $1,800, according to the Egyptian businessman. “People also tend to go to gold during crises and we are full of crises right now. Look at the Middle East and the rest of the world; and Mr. Trump doesn’t help,” Sawiris argued.



Bonds and equities

“The stock market and real estate are the two biggest wealth creators in history,” says Sam Seiden, chief education officer at Online Trading Academy, California, United States. Investing in the stock market is much cheaper and easier than real estate for most people, according to Seiden.

With many different strategies to invest in the stock market, most Egyptians, according to Oxford Business Group, are investing in two ways; trading in and out, buying and selling for higher to make profit, or buying into companies with stocks or equity funds for dividends and increased market value, or buying debt bonds and receiving interest.



A recent study by U.S.-based analytical network NerdWallet, titled ‘Avoiding the Stock Market May Cost Millennials $3.3 Million,’ by Arielle O'Shea and Stephane Lesaffre, found that at an average income of $40,456 (adjusted annually for inflation), leaving money in a savings account would eventually leave a current millenial with $1.27 million in terms of retirement savings over a 40-year time horizon, while investing in the stock market would accumulate some $4.57 million by the end of that period.

Whilst most prospective investors are often worried about market volatility and investing during the right time (timing their market entry right), research suggests that considering the potential gains and losses that one would achieve from the stock market is more important than trying to time markets, something many believe first-time investors would not be able to do, as it requires years of transactions within different markets.

Sawiris, however, warned against investing in the stock market, which he sees to be “overvalued” and bound to crash soon.