Greece Has An Investing Problem
Why Greece has among the lowest stock market participation rates in the world
In most places, striking up a conversation on markets or investing is fairly common. Most seem to have at least some working knowledge and vested interest in the stock market. In Greece however, “market talk” is a rare occurrence. In fact, based on this report, the country has the lowest stock market participation rate in Europe.
Greece Has Low Stock Market Participation
The core issues leading to this stem from a combination of financial market mistrust, poor performance, and the high cost for market access.
Mistrust Of Financial Markets
A young Greek investor once asked "What if I put my money in the market and lose it all?". It is a fair question but it really cuts into the essence of Greece’s biggest problem; a mistrust of its markets, government, and regulators. And rightfully so; corruption, nepotism, and scandals are unfortunately commonplace in the country, making people reluctant to hand off what little discretionary savings they have to invest. Greece, unfortunately, has seen a history of related scandals and manipulation, leading to a very poor public opinion of the market.
The “gambling” mentality. Sports gambling is popular among the Greek population, which has also led to the market viewed more as a casino, forcing a short-term outlook of making money quickly as opposed to a tool for steadily growing assets over time.
Poor Market Returns
The next problem; performance, or lack thereof. Even if the decision was made to invest in the Greek stock market, one would have been met with poor returns for over a decade. Only recently over a 10-year period would an investor begin to see a positive return from the Greek market.
The Greek Stock Market Has Offered Little Growth
The key advantage of investing is the ability to grow assets through compounding returns over the long-term. This can only be achieved if there ARE steady returns in which to compound. Poor performance over an extended period leads to investor fatigue, and thus abandoning hope.
Lack Of Easy Access And High Costs
In most developed regions, investors can trade or access investments at very low cost, even free in some instances. Cheap and easy access to the market is not very commonplace in Greece. In order to invest, one must usually go through their local bank, where fees can be high due to the lack of competition. Additionally, there are very few investment platform options similar to Robinhood or Etoro, offering up easy and inexpensive market access.
The raw materials (Mutual funds) themselves are more expensive when compared to the rest of world. Greek mutual funds on average, carry a higher expense when compared to funds in other regions. Higher costs for these products adds an extra layer between the end investor and the ultimate returns they can achieve. Many of the mutual funds in Greece are run by the major banks themselves, incentivizing them to direct investors towards their own funds, regardless of cost.
Greek Mutual Funds Are More Expensive
A Call For More Education
The European Fund and Asset Management Association (EFAMA), the largest voice for the asset management industry in Europe, recently published a report calling for more action to improve financial literacy across Europe. While Greece did not participate, the core issues identified here are similar. Looking ahead, our mission is to help contribute to this initiative and increase financial literacy in Greece.