Should I invest in the Egyptian pound?

(Money Magazine) -- Would investing in Egyptian currency, the Egyptian pound, be a good idea right now? -- Jeff Torres, Newport News, Virginia.

I suppose it could. After all, as 18th century nobleman and legendary investor Baron Rothschild is credited with saying after reportedly making a fortune buying stocks that had plunged in value due to fears the British had lost the battle of Waterloo, "The time to buy is when blood is in the streets."

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So on the theory that where there is fear, havoc and uncertainty, there is potential for great profit, the Egyptian pound could indeed be attractive. There is blood literally and figuratively on the streets of Egyptian cities, not to mention mayhem, chaos and confusion.

But unless you have some special insight into Egypt's politics, its economy, its financial markets -- and a crystal ball, to boot -- I think you're better off taking a pass.

Why? Several reasons.

For one thing, although everyone remembers that famous bloody quote and cites it as a reason to invest aggressively in the face of turmoil, they tend to forget that, as the story goes, he knew before his fellow investors that the British had actually won the battle.

And to exploit this knowledge, he initially sold to create a panic that drove down prices, allowing him to do some lucrative bottom fishing.

I'd also note that the reason Baron R. was able to make a bundle, at least according to the legend, is because stock prices crash in the wake of his little feint. The Egyptian pound, on the other hand, hasn't crashed.

Indeed, if you go to Google Finance and type EGPUSD into the Get Quotes box and click on the button, you'll see that the Egyptian pound is down only 6% to 7% or so vs. the U.S. dollar over the past year, dropping from $0.18 to $0.17.

It did take a dip of nearly 2% during the first week of February amidst all the demonstrations, getting as low as $0.168. But it actually rebounded a bit after that.

So there hasn't been any big meltdown to cash in on.

That's not to say a nosedive won't occur. You could argue that with all the political turmoil and threat of regime change that the crash has yet to come. Which would mean that now would be the right time to sell the Egyptian pound short -- i.e., borrow the currency, sell it and then repay the loan with cheaper pounds later.

But what if the resolution of this crisis, however it may come about, boosts confidence in Egypt's economy and markets? In that case, the pound could very well rise from its current level. Which means one would be better off buying today rather than selling short.

Which brings me to the central point about investing in the Egyptian pound, or any other currency for that matter, in an attempt to exploit political and economic turmoil: Making money depends not only on knowing which direction the currency will go, but also getting in and out at the right time.

That's no easy feat for traders who regularly follow the currency markets, what with the underlying volatility of many currencies and the fact that (in the short-term at least) their values can be influenced by government intervention.

But I think timing the currency markets is a virtual Mission Impossible for individual investors.

Sure, you could get lucky and make the right call (or guess, which is a better word). But unless you had some intelligence that others didn't (or that crystal ball), you would only be speculating.

If that's not enough to dissuade you, there are also some practical issues that, to my mind at least, make playing the Egyptian pound impractical. Although I don't recommend it, you can easily buy some currencies via ETFs or through foreign-currency denominated CDs and savings accounts.

But the Egyptian pound isn't one of them. Which means to trade it, you'll have to open up an account with a foreign exchange broker, meet its account minimums, etc.

Ideally, you also need to know your way around the forex markets, or at least have some familiarity with how they operate, which would include understanding concepts like "pip". (No, not Gladys Knight's back-up singers, but "percentage in point," or the smallest price change on which a given pair of currencies can trade.)

I'm not saying that all this is beyond the abilities of regular investors. But it strikes me as a lot of trouble to go to, especially to make an investment that's not likely to be part of a long-term strategy or plan.

By the way, I feel the same about making other Egypt-specific bets, such as buying or selling the Egypt ETF that has attracted so much recent interest from investors (I mean speculators) even as the shuttering of the Egyptian stock market sent the ETF's market price to a staggering 10%+ premium over its net asset value.

Bottom line: As tempting as it may be to scoop up big gains in Egyptian currency or stocks, I recommend that you instead exercise the restraint many of the demonstrators have shown and just cool it.

Because the truth is that capitalizing on political and economic upheaval, is a lot easier said than done -- and has at least as much potential to backfire as succeed.