How to invest in the EGX 30 Index
The EGX 30 is the benchmark stock market index for the Egyptian economy and can be a great way of accessing a diversified investment in North Africa. There are multiple ways to invest in the EGX 30 Index, which is a good thing, but also potentially scary if you’re a novice investor. We will help walk you through all the choices available, so you’ll be better prepared and more confident when you’re ready to invest.
What is the EGX 30 Index?
The EGX 30 index (formerly called the CASE 30) is the benchmark stock market index of Egypt, made up of 30 major companies traded on Egyptian Exchange. It’s one of numerous 30-stock blue-chip indexes around the world, along with America’s Dow Jones Industrial Average, Germany’s DAX Performance Index, and many others.
Is it a good investment?
It depends on your investment goals, but it can be. By choosing to invest in the EGX 30 over more established stock indexes in other countries, you’re accepting some degree of uncertainty. On the other hand, Egypt as a country and Africa as a continent are projected to grow considerably in the coming decades, with population, technology, and business trends all pointing in the right direction. As an emerging-market investment strategy, the EGX 30 offers ample upside.
Just bear in mind that every investment asset carries some degree of risk. Stock indices do not do well in bear markets, so it’s important to ensure that the market is looking bullish when investing in the EGX 30 Index.
How do I invest in the EGX 30 Index?
Here are three steps you need to consider before investing in the EGX 30 Index:
- Choose an investment type
- Use our top tips to succeed
- Choose a platform to invest with
1. Choose investment type
There are many different methods you can use to invest in the EGX 30 Index, so the best approach is to figure out the approach that works best for you before investing. Consider factors such as the size of transaction costs, as well as how much customer service you want, before making your selection. Here are some of the most popular ways to invest in the EGX 30 Index:
The EGX 30 ETF (exchange-traded fund) is an investment fund that can be traded on a stock exchange. They behave like a stock in many ways, trading during regular market hours, and containing bid and ask prices that look just like the ones you’ll find when investing in an individual stock. The difference is that ETFs usually encompass lots of assets at once, such as stocks, bonds, commodities, or an entire EGX 30 index. EGX 30 ETF can be an effective, low-fee, and flexible way to invest in the EGX 30 Index.
All in all, ETFs are a smart method of investing if you want to benefit from the diversification of the EGX 30 Index, in the form of an investment asset that is both affordable and easy to trade.
You can also invest in the EGX 30 Index by buying shares of all 30 stocks that the index tracks. This way, you can decide which stocks you want to keep longer-term, and which ones you want to sell, which is a strategy that you can’t pursue if you invest in the index as a whole. The problem with buying 30 individual stocks is that you must make 30 separate trades to buy each one, plus even more trades when you sell each one, which leads to a painful accumulation of transaction fees.
As the EGX 30 only tracks 30 stocks, this approach is more feasible than with larger indices such as the S&P 500. Still, it is worth taking into account that each transaction will come with a fee and will take time to process, whereas with an ETF or a mutual fund you’ll be able to invest in all 30 stocks instantly.
A mutual fund is a professionally-managed EGX 30 investment fund that pools money from many different investors, then invests that money in different assets. A EGX 30 mutual fund (also called an index fund) enables you to invest in all the stocks in EGX 30 Index at once. Unlike EGX 30 ETFs, mutual funds are bought through a broker or directly from the company that administers the fund, and can only be bought at the end of the stock market’s trading day. Mutual funds also charge higher fees than ETFs do. Finally, while diversification helps mutual funds defray risk, it also results in investors holding both the best- and worst-performing stocks within an index.
EGX 30 Index mutual funds make the most sense for investors who want to buy and hold for a longer stretch of time, since they’re more difficult and more expensive to trade than ETFs.
2. Use our top tips to be a successful investor
Before you invest in the EGX 30 Index, review Invezz’s list of investment tips. Keeping these in mind will give you a better chance of success when investing.
- Do your research. Take the time to consider all the pros and cons of investing in the EGX 30, and which method you’ll use to invest in it. Having a plan ahead of time will improve your chances of success. It will also help you avoid emotions such as fear and greed, which can cloud your judgment and cause you to make counterproductive decisions.
- Set a budget. The budget you pick should fit your tolerance for risk and your financial situation. Don’t invest more than you can afford to lose. If you do, you could run up substantial losses that hurt both your confidence and your ability to make future trades.
- Select the right platform. We’ve already highlighted the different trading platforms you can use to invest in the EGX 30 Index. Review them all, then choose the one that works best for your investing needs, whether it’s an inexpensive approach like an online broker, or a more interactive (but pricier) method such as a licensed financial advisor.
- Grow your investments gradually. When you’re just starting out as an investor, it’s best to invest small sums of money. You can always invest more as you become a more seasoned and skilled investor.
- Think long-term. Investing in an index such as the EGX 30 can work well as a long-term strategy, where you can buy into the index then try to hold for big gains over time. Be sure to watch out for bear market conditions setting in, though, as at these times indices tend to fall sharply and it’s best to sell to avoid taking losses.
3. Choose a platform to invest with
Once you have decided which investment asset you want to use to invest in the EGX 30 Index, you’ll need to find a service that will execute your trade. Here are some of the best options for investing in the EGX 30.
- Brokers & trading platforms. Online brokers offer easy-to-use tools that enable you to invest in the EGX 30 Index quickly and inexpensively. That said, online brokers don’t usually offer much in the way of investment advice, so if you’re looking for more hands-on help, it’s best to look elsewhere.
- Robo advisors. Robo advisors rely on algorithms to execute trades, so transaction costs are still relatively low. Some robo advisors will also allow you to discuss your investment strategy with an actual human advisor to help you make the right decisions, giving a great combination of benefits for investors. Robo advisors are still a bit more hands-off than investing through a dedicated financial advisor, though.
- Financial advisors. Financial advisors offer the most help to investors, assessing customers’ financial goals in depth, and explaining how each investment decision fits with those goals. This can be an especially big help for beginner investors. However, investing in the EGX 30 Index isn’t all that complicated, so it might not be worth the expensive fees that financial advisors charge if you just want to try out investing in the EGX 30 Index.
- Banks. If you invest in the EGX 30 Index with your bank, you gain the convenience of having all of your financial instruments (e.g. your checking account, savings account, line of credit, and investments) in one place. The problem is that banks tend to charge high fees, often making them less than ideal for meeting your investing needs as they don’t give you the same access to high-quality investment advice as a financial advisor would.
Here’s a list of our top 3 recommended brokers to invest in indices ETFs:
What should I do now?
If you’re ready to invest, simply go to your chosen platform’s website, type in the ticker symbol of the investment you want to use to invest in the EGX 30 Index, then click Buy. You’re now good to go!
Try some of our investment courses for beginners
Need more time before investing in the EGX 30 Index? That’s fine, you shouldn’t invest until you’re feeling read. Use that time to review our easy-to-follow educational courses and news updates, right here at Invezz.com.