Web Desk
Karachi: Pakistan’s financial markets are on a strong upward trend, attracting both seasoned and new investors.
The KSE-100 Index of the Pakistan Stock Exchange (PSX) surged by 84% in 2024, closing at 115,127 points, and has since gained another 2.3% to reach 117,806.75.
Gold also saw impressive gains, ending 2024 at Rs272,600 per tola, and soaring another 19.2% to Rs325,000.
As traditional assets continue to perform well, Pakistan is exploring new investment opportunities.
The formation of the Pakistan Crypto Council signals the country’s growing interest in cryptocurrencies, a move welcomed by financial experts.
But with multiple investment options available, investors face a key question: Should they invest in stocks, gold, or crypto?
Stocks: The Best Bet for Long-Term Growth?
Investment banker Mustafa Fahim believes that stocks should form the majority of an investor’s portfolio.
He suggests allocating 60-70% to stocks, particularly index funds, due to their historical annualized return of around 20%.
Fahim argues that index funds provide stability by investing in large, established companies.
Shankar Talreja, director of research at Topline Securities, supports this outlook.
He believes Pakistani equities have strong growth potential in the next 12 months.
With the market currently valued at 5.5x earnings multiple (historically trading at 7x), he sees a potential 27% upside.
When combined with a 10% dividend yield, total expected returns could be 35-40%.
Gold: A Safe Haven or a Slowing Asset?
Gold has historically been a go-to asset during economic uncertainty. Muhammad Usman Siddiqui, a research analyst, notes that global instability, such as the Russia-Ukraine war, has driven investors towards gold.
However, he warns that gold returns in the next 12 months may not match the previous year’s gains.
Talreja also advises caution, noting that gold’s price has surpassed $3,000 per ounce.
In Pakistan, gold prices are influenced by both international rates and currency fluctuations.
While gold remains a stable asset, experts suggest it should play a secondary role in an investment portfolio.
Cryptocurrency: High Risk, High Reward?
The establishment of the Pakistan Crypto Council reflects the rising interest in digital assets.
Fahim recommends that young investors allocate around 10% of their portfolio to cryptocurrencies, given their high volatility.
He sees Bitcoin as the safest bet within the crypto space.
Despite the interest in crypto, experts remain cautious. Talreja points out that crypto lacks regulatory clarity in Pakistan and carries high risk.
While unofficial figures suggest 20 million crypto users in the country, financial analysts argue that many use it for transactions rather than long-term investments.
Why Aren’t More Pakistanis Investing in Stocks?
Despite the stock market’s strong performance, participation remains low, with only 324,952 individual accounts registered.
Experts cite financial illiteracy, preconceived biases towards gold and real estate, and taxation as key reasons for low stock market engagement.
Fahim believes that awareness and education can change this trend. He notes that digital investment platforms and fintech startups are working to make stock trading more accessible.
However, he warns that if crypto becomes regulated and taxed, its appeal among Pakistani investors may decrease.
Balancing Risk and Reward
Experts agree that asset allocation should depend on age, risk appetite, and financial goals.
Young investors should prioritize stocks for long-term growth, while those nearing retirement should focus on stable assets like gold.
Cryptocurrencies, due to their volatility, should only form a small portion of an investment portfolio.
With Pakistan’s financial landscape evolving, investors have multiple avenues to explore. Whether choosing stocks, gold, or crypto, diversification remains the key to a balanced investment strategy.
