In Pakistan, the financial markets have seen significant gains in stocks and gold. The PSX index surged 84% in 2024, while gold prices increased by over 19%. Experts recommend asset diversification, suggesting heavier investment in stocks, moderate in gold, and small allocations in cryptocurrencies. Despite a growing interest in crypto, stocks remain the favored choice for long-term growth, influenced by market confidence and economic factors.
In Pakistan’s financial markets, a significant uptick has been observed as the Pakistan Stock Exchange (PSX) index increased 84% in 2024, reaching 117,806.75 points. Gold prices also surged, climbing from Rs272,600 to Rs325,000, reflecting a massive 19.2% increase. Amid this financial excitement, the establishment of a Pakistan Crypto Council points to a growing interest in cryptocurrency investments, showcasing a shift towards modern asset classes in the country.
As investors consider where to allocate funds, insight from experts suggests diversification is key. Mustafa Fahim, an investment banker, emphasizes the importance of including various asset types. He notes that investment allocation should reflect an individual’s time horizon, age, and risk tolerance, recommending that younger investors invest a larger portion in cryptocurrencies while maintaining substantial holdings in stocks, especially index funds. He advocates for 60-70% of investments in stocks due to their historical stability and strong returns.
Shankar Talreja, director of research at Topline Securities, anticipates continued strong performance in Pakistani equities over the next year. He highlights that the market currently trades at a low earnings multiple compared to its historical average, indicating potential for returns of around 35-40% when including dividend yields. He expresses caution regarding gold, predicting lower returns in the coming year due to high international prices and currency fluctuations.
Muhammad Usman Siddiqui views gold as a solid asset during uncertain times but favors equities as the more advantageous investment in Pakistan. He suggests an asset allocation of 50% in gold, 40% in equities, and a minimal percentage in cryptocurrencies. He also warns of the regulatory uncertainties surrounding crypto, recommending only small allocations for more risk-tolerant investors.
A local investor reiterates the challenges posed by high gold investment costs while noting that stocks and cryptos can be accessed with smaller amounts, making them more appealing. The current climate reflects a hesitance toward cryptocurrency investment until regulations become clearer. Fahim reiterates that while gold is a stable asset, stock investments generally outperform over long periods.
Fahim recommends prioritizing stocks, followed by gold as a stabilizing asset, and allocations to crypto for potential high rewards. He perceives Bitcoin as a reliable digital currency but advises caution due to crypto’s volatility and lack of regulatory clarity. Despite a large number of reported crypto users in Pakistan, he warns against equating these figures to actual investors, as many engage in transactions rather than investment.
Experts express concerns regarding the acceptance of stocks in Pakistan, with low participation rates suggesting a need for improved financial literacy. Fahim explains that a cultural bias towards gold and real estate contributes to the reluctance to invest in stocks. Education is essential to shifting these perceptions and increasing market engagement. He also notes that a regulatory framework for crypto could enhance its adoption, although this might introduce tax implications affecting investor behavior.
Ultimately, investment decisions hinge on personal circumstances such as age and risk tolerance. Fahim advises that younger individuals should lean more towards stocks for potential growth, while those nearing retirement should consider safer assets like gold. The ongoing evolution of investment in Pakistan underscores both opportunities and challenges in navigating traditional and modern asset classes.
Overall, while experts lean towards equities in the Pakistani context for growth and stability, individual preferences and risk profiles play a crucial role in shaping investment portfolios. Balancing these assets—gold, equities, and cryptocurrencies—could provide a more resilient strategy for current and future investors.
The article provides insights into the evolving landscape of investment options in Pakistan, focusing on traditional assets like gold and stocks, as well as emerging opportunities in cryptocurrencies. Expert opinions suggest that while equities are currently the most favorable investment due to their historical returns and market conditions, gold serves as a stabilizing asset. Caution is advised regarding cryptocurrency, which remains volatile and less regulated. Overall, effective diversification according to individual risk tolerance and financial goals is recommended for investors in Pakistan.
Original Source: www.thenews.com.pk
