Money investment in Pakistan is one of the best ways for an investor to increase capital gains. An investor is advised to save some of their disposable income, however, saving too much of it reduces their chances of effectively growing their wealth. Investing in a Capital Market is one of the best ways to do so. A capital market is a place where securities are bought and sold, mostly for the long-term. This blog aims to highlight numerous safe ways through which a fresh investor can invest.
Pakistan Stock Exchange (PSX) is perhaps the most common means of investment known to most people. To invest in Pakistan Stock Exchange is considered a high return investment in Pakistan. The stock market has numerous companies that issue shares for investors to purchase, listed on it. To buy shares in a company, an investor must first open an account with a reliable brokerage firm. They must also be well-acquainted with the firm they wish to buy shares in. It is essential to be confident in the management, financials and goals of a business before deciding to invest in it. Stocks are also extremely liquid as they can be purchased and sold very easily and it is therefore beneficial to have invested in them. Buying shares in a company also gives the shareholder benefits that include receiving discounted or special services. Dividends are an added advantage to investing in a company. Most companies give out cash rewards in accordance with company policy. Small incremental investments can yield high returns in the long run, should an investor choose to invest wisely. Trading on the stock exchange is now easier than ever. Online applications such as the KTrade app, allow an investor to trade stocks on their own. They need not have a professional trader execute their transactions for them.
An important rule of investing for the investor is to diversify their portfolio as it helps reduce risk. One way to do so is to invest in different commodities. Commodities are one of the oldest investments to exist and are prevalent till date. Pakistan Mercantile Exchange Limited (PMEX) is the first futures commodity market in Pakistan. Trading commodities includes the exchange of raw materials such as gold or oil for instance. Investors can invest in commodities through brokers. One of the advantages of investing in commodities is that when inflation rises, demand is usually on the higher end of the spectrum which in return leads to increased prices. It is also centralized and regulated, making the trading process a transparent one.
Mutual funds are a very convenient and low-cost mode of investment. They are maintained by Asset Management Companies who invest in securities like bonds, stocks for the investor. Once the investor deposits money into their account, professional money managers invest in these securities for them. The investor does not have to get into the hassle of figuring out what stocks to purchase for example. Mutual funds cater to investors that do not or cannot invest large sums of money in a go. They are also very liquid which further adds to their list of benefits. A mutual fund is an example of a small investment in Pakistan that can lead to increased growth in wealth. Mutual funds enable an investor to diversify their portfolio in case their investment in a different sector is unsuccessful. Mutual funds are carefully monitored and regulated by authorized bodies which reduces chances of fraudulence. Further, non-resident Pakistanis are also eligible to invest in mutual bonds. A mutual fund may also receive dividends on the securities it owns. A certain percentage of these dividends is to be distributed between investors. Hence, it is one of the most efficient ways to invest money in Pakistan.
Government bonds, as suggested by the name, are investment certificates issued by the government to an investor who has paid a specific amount of money to the government as a loan. It is to be repaid to them after a set duration of time at a fixed rate of income and interest payments. They are also an example of a low investment business in Pakistan. A benefit of investing in a government bond is that it comes from a credible source which minimizes chances of fraudulence. The level of risk too is reduced for a bondholder as the bond approaches maturity. An investor can invest in bonds either by opening an investor’s account through banks or through the Stock Market. The aforementioned reasons are why government bonds are considered to be one of the more convenient ways to invest money in Pakistan.
Investing in Real Estate involves investments through Real Estate Investment Trusts (REIT). It gives the investor a chance to diversify their portfolio by investing in different types of properties. This further helps reduce the risk of volatility. By investing through a REIT, the investor can invest in properties they might not have been able to if they were relying solely on their own capital. Investing in Real Estate also yields high returns which is often the most attractive feature to an investor in this field. Buying and selling real estate investments is also fairly simple to do and information regarding REIT prices is easily accessible to the investor, further adding to its list of benefits. Real estate investors make money through rental income, appreciation, and profits. Since real estate values tend to increase, a good investment can lead to a hefty profit.
Depositing money in a savings account is another way for an investor to grow their wealth. The bank that the investor has deposited their money in, will use their funds for different purposes and in return will pay them interest on their savings. Savings accounts are easy to open and access and an investor can make regular deposits and withdrawals within the set limits. Savings accounts are also a safe way to save.
Special Savings Certificates (SSCs) are issued as an additional investment opportunity. It is available in eight different amounts as options in the form of a certificate. All Pakistani Nationals and Overseas Pakistanis are eligible. They can be purchased from any National Savings Centre (NSC), a branch of a Scheduled Bank that is authorized to do so or from the State Bank of Pakistan (SBP). These are also a safe way of investing as they are administered by a regulatory body. Some products include, Defence Savings Certificate, Behbood Savings Certificates and Regular Income Certificates. There are different accounts that an investor can open based on their needs. Examples include, Savings Account, Pensioners Benefit Account, Special Savings Account and Shuhadas Family Welfare account. All Pakistani Nationals and Overseas Pakistanis can open a Savings Account.
Just like the Stock Exchange is used for the exchange of stocks, the Foreign Exchange Market is used for the buying and selling of currencies where one currency is exchanged with another. It controls the exchange rates for currencies all over the world. It is also the largest and also the most liquid financial market in the world. An advantage of trading on the Foreign Exchange is that regulations are not as stringent in this market. The Forex Market also operates 24 hours a day and so the investor can invest in it at any time of the day. Trading on the Forex Market also requires minimal investment which is an edge not every market has. An investor new to the market can easily enter it and use technical and fundamental indicators to get a better understanding of the market and benefit from it in the long run. Technical indicators are based on past trading activity and price changes of a security. A fundamental analysis however, concentrates on a company’s financials.
Profit from Currencies
Investing in currencies has been seen as common practice in Pakistan. Even though this too involves the exchange of one currency with another, it is slightly different from Foreign Exchange trading. Once an individual purchases a currency, they hold it until the value of a currency reaches a high that they are satisfied enough with to sell the amount that they had purchased, and make a profit.
Exchange Traded Funds (ETFs)
Exchange Traded Funds are a convenient investing option for amateur investors who have little or no knowledge about the Financial Market. ETFs comprise a diversified group of stocks that helps reduce risk. ETFs are liquid and can be bought and sold during trading hours. ETFs are less costly in terms of fee; however, a broker’s commission is charged against their trades. Pakistan currently has four listed ETFs and is a transparent mode of investing. All holdings are disclosed to the investor. ETFs also offer the option to immediately reinvest dividends. They are also more tax efficient as they achieve fewer capital gains than other securities.
It is recommended that an investor does thorough research before choosing which form of investment to go forward with.