Scrooge McDuck (upon being granted a wish by a genie): I wish for the world’s biggest diamond no, the entire diamond mine no, all the diamond mines no, the entire mining industry! Hmmm I can see why this can take some careful thought.

Whatever stage of life you’re at, it’s never easy to decide how to invest your money. Like Scrooge McDuck, no one will ever say no to the chance to make more money. But when it comes to personal investment, the vast majority of us have no clue where to begin and at the same time dread tying up hard-earned salaries as daily bills mount. The question is how to grow your nest egg without dropping it.

The answer in a nutshell? “Diversify.” That’s what Ahmed Saad, head of energy, commodities, trade and investment banking at BNP Paribas, advises.

“To cover your bases, you need to optimize your investment strategies,” Saad says. “In other words, you need to put your money into several things at once, thereby minimizing risk and increasing profit. In life that’s actually a contradiction in terms, because high profit requires high risk, and while a low-risk venture yields low returns. If you choose to go down the two paths at once, you’ll end up with a mix of investments yielding an optimal return with the lowest risk possible. It’s very sophisticated, and when you’re a small investor with less than LE 1 million, you definitely shouldn’t do it on your own. Many people make that mistake and lose.”

“Find yourself a fund or portfolio manager who can juggle your investments,” Saad suggests. “Generally, you’d go to a fund manager if the sum you have isn’t so large and he pools it with savings given to him by other clients, then invests the total as a whole. Your yield would be a percentage reflecting your stake in the fund. A portfolio manager, on the other hand, is dedicated exclusively to managing your cash.”

Although there are a thousand and one advisers and managers ready to snap up your business, Saad says it’s important to find the right candidate and make yourself aware of the various yardsticks indicating the measure of a good manager.

“Look at [his] performance and track record, information you can pick up by reading the paper every week. But,” Saad cautions, “a successful track record does not just mean someone who makes 100 percent return on his latest investments. The keyword is consistency. So if this man makes 100 percent return one year and 30 percent loss another, then he’s not for you if you’re a careful investor. “

Those with little or no knowledge of the investment industry may be excused for thinking everyone is careful when it comes to handing over their money.

“In fact, investors come in two types: the careful and the risk-takers,” explains Saad. “If you’re one of the latter, then by all means go for the manager declaring the highest returns. It goes without saying though that the best manager is one who can read his clients and figure out which category they fall into in order to come up with a dynamic recipe for their investments. This recipe is dictated not only by the client, but also by the state of the market and can change every day to keep abreast of emerging trends.

Ebeneezer Scrooge: I’ll give you some good advice: be selfish, be greedy and trust no one.

At Sigma Securities, Head of Research Hussein Abdel Halim begs to differ when it comes to small investors running to managers.

“Never take anyone’s advice,” Abdel Halim declares. “Instead, do your homework. Yes, you should talk to banks, and yes, you should talk to brokers. But primarily, you should read. There are tons of ‘investment 101’ articles on the Internet. After you get the general information down pat, start reading up on the local market in specialized papers and magazines. If you have more than LE 500,000, that’s when you should start thinking about going to a professional manager.”

So given the choice between the different types of investment vehicles available today, ranging from banks and the stock market to real estate, bonds and private ventures, what does Abdel Halim think we should do with our money?

“The stock market,” he says without the slightest hesitation. “The good thing about the stock market is that it is very liquid and gives you several options to invest. Say you go for an equity or fund and buy today. You can sell the day after tomorrow if you need your cash immediately. No need to take out an ad for your property (as you’d have to do with property) or scramble to find a replacement investor if you’ve put your money into a private venture. It goes without saying that when the stock market is strong, returns outperform banks.”

As such, Abdel Halim sees that the stock market will always be a better investment instrument. “I don’t think anyone should go alone into any other venture unless they have specific information about the industry,” he says.

By definition, investment means you are looking for profit, so before you attempt anything you have to figure out if it really is a good investment. For example, if you want to go into real estate, you have to study not just how much you’ll be spending on a unit and how much you can sell or rent it for in the future, but whether the same amount you paid wouldn’t have yielded a higher return if invested in the bank or on the stock market

Even worse, you may not be able to get the property off your hands. “In the real estate market value depends on demand,” Abdel Halim explains. “At any given point in time you may have property, but no buyer.”

Industry insiders could do better on the stock market, Abdel Halim postulates. “If someone comes to me and tells me they want to start up a restaurant or are considering something in IT, I tell them to buy stock in the tourism sector or shares in a company. All you spend on the stock market is ‘X percent’ commissions and that’s it. There are no valuation or finance problems to deal with. And if they don’t make you profit, you’ll be able to drop them within two days, even if that’s at a loss.”

But wisely played, stocks can make you money. Lots of it. “For example, Orascom shares sold for LE 7 when they first came on the market. Today they trade for 70 times more, at LE 470. In 2003 and 2004 the stock market made an 80-100 percent profit. In the first five months of this year, it’s made 40 percent. No bank can match that.”

That said, Abdel Halim does point out that the stock market may not be for everyone at any given time.

“The type of investment and even the sum of investment depends on where you are in life,” he admits. “For example, a man with a family may think more about investment than a fresh graduate, but he won’t be willing to risk as much. For both, the stock market may be a better option than real estate or the bank, especially if they invest more and the market is up, but it wouldn’t be for someone over 60 with no other income than their pension. Not even a penny, because for them it’d be too risky.”

Even at the best of times, Abdel Halim does not advise putting more than 40 percent of your nest egg into the stock market. At press time, Abdel Halim described the current state of the market as being “sideways that is, it goes up as much as it goes down, which means it is more or less stable.”

He feels this is likely to change depending on the outcome of the elections, and until then advises those of us who fall into the “careful” bracket to consider fixed-income funds. “They’re a good option because they don’t lose.” The downside is that their returns are not as high as equity funds, but they may do slightly better than banks.

Scrooge McDuck: Oh, no! I’m not letting this opportunity slip from my fingers!

Those investment strategies are all well and good for those with extra cash to spare, but what about those of us dreamers with very little disposable income to speak of?

“The only way to save, for someone with a fixed income, is to cut down on expenses,” says BNP Paribas’ Ahmed Saad. “Small investors have to tie themselves to schemes where you are forced to pay installments. Insurance schemes, for example, have become very attractive. Today, we have something called bank assurance, where a product is offered jointly with insurance companies. Premiums, which are essentially installments, are paid monthly, quarterly, semi-quarterly or annually for a limited but long-term period after which the client receives a lump sum.”

“Clients can save for retirement or put aside money for their kids’ education, their marriage and so on,” Saad continues. “The difference between annuities and your typical bank savings account is that here the interest is compounded. It’s a sound investment instrument with the added privilege of insurance. And the sweetener is that should you become incapable of paying your premiums due to death or ill health, the bank/company pays them for you, so that at the end of the day, you’ll still get your lump sum.”

The question everyone’s asking is whether these insurance-type schemes will catch on.

“The insurance market here is very underdeveloped. But it’s ripe for insurance companies now,” Abdel Halim says. “Fresh graduates may not find them attractive, but mid-level managers, people in their 30s, those with families and also those looking for a retirement package will certainly consider them. People are now tending more toward this type of plan because they have become less dependent on support. The socialist system, in which people sought insurance through their families, companies or the state, is shrinking.”

While Saad sells these schemes as an investment instrument, Abdel Halim does not necessarily believe they are a better option than even real estate as their return is in fact quite low. Still, he does concede they are becoming more popular and careful investors with a low margin of dispensable income are snapping them up.

“It’s going to get really advanced and is fast becoming a high-growth industry.”t et