So, you are one of those who managed to save a little money from the blood-sucking economy that is hell bent on ruining out status of living, and now you want to know as to what could be the best investment? First of all, we would like to congratulate you upon saving some funds and asking for expert opinion. Well, as far as investment is concerned, the typical Pakistani mindset would always think of a few things: prize bonds, dollars, gold or real estate. The last one is the best, but it does not apply to the middle class Pakistanis. As compared to prize bonds, dollars or gold, property takes a lot of money.
Well, before we give our opinion, let us have a look at another option that most of the people are not aware of, but that has made SOME big waves. This is bitcoin, the digital currency which is skyrocketing with passage of every week. The chart below shows, there was a very slow growth in early years of Bitcoin. The price if we consider 2014 as the base year the price has seen a steady increase of about 300%.
In 2010 the price for one Bitcoin was $0.008 and it first made an impact in mid-2013 when it touched the barrier of $250 per Bitcoin. From then onwards, it was a steady rise and the climax was when Bitcoin crossed the psychological barrier of USD 1000, back in the fall of 2014. After that it was a speedy decline, but Bitcoin showed some resistance and today one Bitcoin is worth $740+. If you have a look at the other chart, you’ll see that weekly local Bitcoin’s volume in PKR is still more than PKR 1,600,000.
Now, let’s have a look at real estate. Well real estate certainly guarantees increase in annual revenues. The price always go high, apart from a few exceptions. Let us take a look at this chart. The average price of residential property is PKR 9,931 per square feet and it is only going up. Market shows a very steady growth from 2011 to 2016. Price per square feet index shows that in 2017 the price per square feet index will cross the psychological barrier of 10,000/square feet. If we consider the same time frame in Pakistan the price of property has grown on an avg of 40% depending on which locality you have invested. Which means you have to be well aware of the local before you actually invest.
Gold investment has not been a very good choice for a long time. If we have a look at the chart, we can see that back in 2012, the gold price per kg was more than $57,000 and then there was a tendency of falling gold prices; the price was at its lowest in a period from Jan 2012 to July 2012. It descended to $50,000 per kg and then was a sudden rise. The highest gold price was noticed before January 2013, when the price almost touched the barrier of $58,000/kg. From then on wards, it is only a falling action. In late 2013 gold price set a new barrier: $42,000 per kg and for some reason the prices have been mostly around this figure. The price of gold on the other hand is below 10% increment if an investment was made in 2014.
Another important factor is the inflation rate. Our inflation chart shows us how Pakistan’s inflation rate is fluctuating. Back in 2014 the serious efforts of Government resulted in a steady decrease in inflation rate and it descended from more than 5% to 4%. In coming months inflation descended to an ever lowest 2% but it soon went upwards and around June 2015 it was more than 3%. Then we noticed another decrease and by the mid 2015 it was at its lowest. Since then on wards it was only an increase and as per the latest statistics, in the fall of 2016 inflation rate has crossed the psychological barrier of 4%. However, that was not a long-lasting success and very soon inflated started to rise again. When compared to the record low inflation rate: 3.40 percent in September, 2015, this new inflation rate cannot be described as anything short of horrifying and unnerving. For a common man a simple equation means that if you bought a a loaf of bread in 2014 it would be 8% cheaper to buy then roughly. This also shows that currently the PKR is on a year to year decline in value and hence the buying power is decreasing so keeping value in fiat currency in Pakistan is an automatic no go.
So, the question remains the same! To invest or not to invest? And if to invest, where? I leave that upto you, if you look through the charts and percentages you would see how important investment is for the future, and keeping funds in fiat currency might be the worst idea. We did not take into account saving accounts here but the interest rates on profit rates(if we are talking islamic banking) have steadily falling and is less then 8% per anum.