A Primer on Investing for Karachiites
* The aim of this series is to provide a small investor in Karachi with a strategy so that he/she can comfortably invest his/her money. This should by no means be construed as professional advice, and you are advised to follow it at your own risk. *
With the prices of everyday stuff in Karachi going up (130 rupees per kilogram for TOMATOES!???), it has become very difficult for salaried individuals and small businessmen to keep up their everyday expenses, let alone be able to save a good amount of money to someday buy their dreamhouse or go on a dream vacation. Because of the financial pressure, everything is being financed by credit cards, personal loans, auto loans, etc. If you come down and think it through, the buy-now-pay-later scheme ends up costing you a lot more in the long run. If you think a Honda Civic at 12 lakhs is expensive, get a 5 year auto-loan and find out that it ends up costing you more than 20 lakhs, and after 5 years is probably worth not more than 5 lakhs. Invest that same amount of money for 5 years, and you will find that the 12 lakhs you put in have turned into more than 20 lakhs, netting you a Civic on cash with plenty of cash leftover.
A little bit of planning and budgeting in the monthly expenses will give most of us some breathing room. Some of us might find we can save 1,000 rupees per month. Others with hefty paychecks might be able to save 10,000 rupees or more per month. The point to take home is that just saving and keeping the money in the bank is not enough. We need to learn to put money in the proper place, so that later in life we can stop working for money because our money is working for us.
The main aim of this series will be to approach investments available to a Karachiite, taking into consideration 2 factors:
– Money to be invested
– Investment horizon
Money to be invested:
We will give advice to 3 different groups:
– People able to save 500-1,000 rupees per month
– People able to save 1000 – 5,000 rupees per month
– People able to save more than 5,000 rupees per month
Investment horizon:
Again, 3 different groups:
Short term: Will use the money within a year
Medium term: Plan to use the money between 1-5 years
Long term: Plan to use the money at least after 20 years or more
Any comments, suggestions, or questions are welcome. Please keep your comments relevant to the topic, or they will be deleted/censored.
Please re-check the price of tomatoes, it has gone down due to Indian imports
Great effort to curb our overly consumption-oriented population though..
May Allah teach us to save and curb our extravagant nature
Try not to use Credit cards for buying tomatoes :), no seriously , use credit wisely.Invest in real estate.
Dee
If inflation is kicking in, meaning the prices of daily items we use is going up. one needs to buy those items and sell it with profit after waiting some time on it. You need to play this inflation in your advantage , so in the long run you make up for it or do get some profit out of it. It can be a car, a real estate ( best option). Any thing but Not cash. If you donot have enough cash to buy real estate, then few people should get together and pitch in.
To increase income one may find some work on the weekends, teaching tution. or working part time for a private school. Get some business contract.
And buying on bank credit is a NO NO.
And also try to work outside the country in UAE Dubai if you get a chance.
Gold or NIT units is safe bet,.
– – –
Credit cards and Bank leases are worst then HIV – Over period of time HIV has become cureable disease.
Bank Loans, Credit cards, Home loans, and Leased stuff not all survives these scams, unless otherwise managed with GREAT RESPECT and CAUTION.
a Honda city is costing 2 Million on 5 year lease, where as after 6 months it is at not even the price of brand new in show room. Is that not a scam? –
Islam & banking – these are Fire & water, Islam does not have any concept of Banking – whatever people write or talk for such AJARRA, IJRA thats all eye wash, im the end ALL is “Interest” which is
HARAM.
Watch your spending habits, –
A person end up in ‘ASKING LOANS’ whose income is not proportional to the expenses., and Once in a loan it becomes a Vicious circle which can never end.
MONEY MANAGMENT is most unmanaged issue among the age group of 27 – 35
Considering the inflatioon situation… should i be savin smethin out of my pocket money from now on?
For people who religiously keep an eye on their withdrawals and expenses in a checkbook (or any other medium they choose to keep the madness under control) every time they do anything with their money, do this:
Anytime you make a purchase and note it down, round it up to the next rupee.
Example: you spend Rs/136, round it up to Rs/140 when you note it down on your checkbook. That is Rs/4 that you think you have already spent, and therefore is no longer under your ‘available to spend’ money. At the end of the month, how much ever money you saved up using this tactic, transfer to a savings account.
Yes, this does seem very measly, but trust me, little things like this add up…fast.
On a side note, this is an excellent post!
SHAFAQ :)
am sure someone WISE passed it to you like my Grandpa did
It never made sense to me till i got my 1st pay chq while working for school library.
Adopted since then and till date it works wonder I i started it with next 10 and Now round-off to next 50
– Zara – better learn from others experience and be wise.
Will be eagerly looking forward to this …
And dont forget THE ONLY TRUE HARD CASH IS REAL GOLD.
BUY GOLD WITH WHAT YOU HAVE AND THIS WILL AUTOMATICALLY BE PROFITABLE. NOT JEWELERY BUT GOLD BAR OR COINS.
GOLD IS THE ONLY TRUE SIMPLE SOLUTION AGAINST INFLATION, FOR GREAT GOOD AND SAFE INVESTMENT WHICH ALWAYS WORKS. WITH ALL THE ODDS.
NOTHING BEATS GOLD.
This is an excellent post and some really nice comments. I save but can’t invest (partially due to fear). There are crooks in the real estate market (many of you guys may have good contacts but I dont). Stock market is in the hands of a few (at least that is what I have heard). I dont want to own fixed deposits (SSC, DSC, etc). And I also believe that keeping money idle (not in use) is almost a crime both personally and socially. So definitly looking forward to it.
Khurram,
this is an excellent post and I will look forward to a more detailed post on this issue. There are many many non resident pakistanis here in the US for whom this would be extremely informational. The average middle class investor in the US or in any other economy does quite well with nominal annual investments and hopefully your information would provide some possible choices for safe investment from abroad.
Imran
With the current stock market levels, i think it is the right time to buy. with Mushi already declaring the elections date and most of the scrips already undervalued…it might be the right time to buy…its a personal opinion though..
Bluemax – when you say its in only ‘few hands’ maybe correct but then in the longer term it gives good return..buy good shares which pay good dividend and you will notice that you might just earn more than the average interest rate.
Also, one more thing, is anyone aware of a good real estate scheme whereby you contribute in instalments to get a reasonable apartment in karachi? must be reliable?
Save Rs. and buy YEN (chinese currency) if you want to become rich in few years.
Jamal, you’ll be surprised that banks are actually providing this service to their customers free of charge. It really is an amazing idea, and can be done by anyone no matter which earning bracket they fall in.
I love the simplicity of it. Your grandpa is/was a wise man for sure! :)
Thanks for the positive comments everyone! I didn’t know people were this interested in investing. I plan to go down the path of everything people are mentioning here, e.g. whether gold is a good investment, how to invest in real estate if you do not have enough cash on hand, how to invest in the stock market, even though it is in the hands of a few. Keep the suggestions coming in.
Khurram,
I liked the idea and if possible do cover “Qomi Bachaat” schemes too.
Saqib: Yen is Japanese currency, not Chinese.
Khurram…I am really thrilled to see such a positive and useful topic on KMB , Finally.And these ranges of groups and horizons you mentioned are really practical, not applicalable to rich masses alone.I really wish our people should wake up do not just hoard their money espec GOLD, and invest their money wisely,benefitting not only themselves but the country too.We should be looking at individual(small) enterprenuership in the future..Something we should learn from Bangladesh(Grameen Bank-bank of the poor,serving in Pakistan too), we need something like this to end the menace of poverty and ofcourse Beggars..We all are looking forward to this post,Great Initiative!
excellent post. thank you khurram.
Check “mutal funds” also they are also good investment but its risky also
good post buddy. looking forward 2 the series!
yuan Chinese currency ..
http://www.nit.com.pk –
the right choice – :) http://www.nit.com.pk/nav.htm
or GOLD
– –
anyone who have few million extra – invest in dubai property – 30% minimum growth in 8 months
– –
Property in Karachi is equally good BUT – if you know the developer and visited the projects,
cheers !
we are all on the TOPIC so FAR ! :)
http://www.slide.com/r/q04klt9C6j_t3CB1eNl6l_Z2XSxeWF7B
listen to it – funny :) one made my day
@Zara Ali…..> You have to invest in yourself,How? .Whenever you got your pay cheque , pay yourself first, it need not to be hefty but it will be something for your rainy days.Even if you are a student try to save some pocket money.
I am not against Credit but its the use of it that can land you in trouble.If you need to pay you tution, pay your mortgage, pay for your pension plan then credit comes very handy.
Gold is better than real estate only when its in pure form(24k biscuits) otherwise if you try to sell the jewellary the jewellers charge you for the all kinds of things.So my best bet would be real estate, if you can not afford it then pool it with other folks whom you can trust.
Happy investing folks.
Dee
Man the stock market(NYSE) is too volatile these days. I have lost 40K $ in last 12 days but then it’s life, not worried at all but frustrated but then it’s the time when I need the patience most.
OBI –
Dubai properties rocketed only when Americans realised that it is safe heaven to avoid taxes and return on the investment is beyond an AMERICANs dream.
minmum of 45% is what Dubai properties can capture, – and repatriation of money is Tax free – the annual rent of properties is an average of 12% per annum which is not any residentail property can get in general in US.
Money is safe as all properties are under State owned property management board who ensure schedule completion or else payment of delayed charges as per rental law of UAE.
Naturalised INDIANs & PAKISTANIs from US, UK & europe having ENOUGH money are investing in 2nd homes which give them tax free income on their savings.
Try that property market – visit UAE check out the developers and their projects put up your money there, BEING US passport holder visior do not need a visa 90 days is granted at arrival on Dubai airport anytime.
A worhty effort, Khurram.
Some notes:
Gold hoarding is one of the reasons why the Pakistani economy suffers so badly – it represents a “leakage” from the system. That is, it’s money that will likely never be spent which means potential earners will be deprived of their earning.
Thanks to the field-leveling robberies, the gold hoarding and displayinng trend has taken a sharp decline. And the youth of Pakistan aren’t into this kind of thinking anyway.
What an economy likes our needs to do in order to first get going is to have a strong “primary sector” – small industries, cottage industry, agriculture etc going. Primary sector are “real” products – which can be consumed even if all markets crash – to put it crudely.
Entrepreneurship, and microfinance hold the key to development in Pakistan. Selfish investment policies are resulting in inflation, and other freakonomic phenomenon.
One idea is to create lending/borrowing circles – which has done wonders to bring positive socio-economic change the world over. In Pakistan, the closest thing to it is the “committee” – which, if regulated by more than mere promises between housewives, can yield great empowerment for the people.
FOr more ideas, see http://worldchanging.com.
Excellent post.
just a few tips, all of us are thinkkng about saving money. y dont we all think how to save first and then invest, this is for those who really dont have much savings n even dont know how to do it. one thing that i hve noticed alot these days is usage of automotives. It cost you in terms of money and health as well. for instance in old days ppl use to walk for shorter distances which not only make them fit physically bt also contribute in saving money as well. think if u dont use your car/bikes for shorter distances how much monthly fuel u ll save and that ll count. its nt the matter of money only it ll improve many things automatically.
i m expecting some more tips on how to save money as well. Nice post.. keep going… as karachi, Karachiets rock too…..
Excellent post.
just a few tips, all of us are thinkkng about saving money. y dont we all think how to save first and then invest, this is for those who really dont have much savings n even dont know how to do it. one thing that i hve noticed alot these days is usage of automotives. It cost you in terms of money and health as well. for instance in old days ppl use to walk for shorter distances which not only make them fit physically bt also contribute in saving money as well. think if u dont use your car/bikes for shorter distances how much monthly fuel u ll save and that ll count. its nt the matter of money only it ll improve many things automatically.
i m expecting some more tips on how to save money as well. Nice post.. keep going… as karachi, Karachiets rock too…..
@Saqib….hope you are not a trader or broker…LOLLLLLLLLLLLLLLLLLLLLLL
ROFLMAO
And if you want to make or try your luck in stock market.
Here are few things i learned the hard way.
$25k gives you Margin account.
Margin account with $25k gives you buying power of $100k. so that you can buy or short (sell first and buy later when the price fells to lower amount) of about say 5000 of $20.00 stock.
Now if the price goes down 10 cents to $19.90and you have played short. You make easy $500.00
The problem with Margin account or trading is that you have to give the money back before the market closes the same day.
The thing i have learned the hard way is that you should only play margin if you have in this example $80,000 extra that you can support your Margin account at the end of the day. In tis way you can play with all the comfort and peace of mind.And can easyliy make .1 or .2 cents for sure in 2-3 days. that is $500-$1000 atleast 2 or 3 times a week.
Good way to trade is to play index, eg S&P500 or Nasdaq’s QQQQ. Key is not to play individual stocks. play the index which are group of companies.
And its better to short than to buy and then sell later.
Happy trading :)
i meant .1 to .2 dollar. easy every day.
also its easier to trade right in the first half hour of the trading day or the last half hour near the closing time.
study the market at least for 90 days before you jump in it with your money.
and you can never be too careful in trading.
with quite a few people here recommending real state in karachi as primary investment vehicle, the question is, is there any lesson to be learned from US real estate market.
In US, because of multi year run up in house prices, most of the areas have become expensive for average joe to put his hands on, and now the market is in correction state, (which may be quite severe).
With prices in karachi real estate sky rocketting over past few years (esp after 9/11) does anyone see the real estate market correction anytime soon ?
It has been correcting for the past one year. In Phase VIII for instance the prices have fallen down from 120-140 to a manageable 70-80( lacs).
Even among the real estate , my two cents is to avoid the hype. People who fell for the Millenium Mall and Saima Towers near Gulis-jauhar are in for a major surprise when 500-600 flat come into the market.
Middle class people have burnt their fingers in the hope of Ahsanabd turning into a magistic profit because of alleged construction of phase 9—!!!!!
And whatever happened to people who bought files of plots in Gawadar in hope of that being the Eldarado of Pakistan. The last I read , the Baluchistan governement had refused to acknowledge rights of any person who was not from Baluchistan and the cases had been filed for a thirty year marathon in the provincial and federal courts.
I am really surprised by this analysis about Dubai ‘s property . Two years back – I was actually turned off when I saw studio flats in dubai being sold for more than what they would cost in MANHATTAN and downtown Toronto….moreoever they selling people were some romanian or philipino eye candies and bimboes and I felt that they were a bit fishy. The prices were jacked up on grounds of glossy advertising and sexy babes sitting in teh offices.
if anyone has FIRST hand account of how a 55000 British Pound £ studio flat in Dubai is yielding a monthly income of 500 –I would love to know about it.
To me it sounds surprising that people would rent in a state where there is a construction boom and banks are begging you to take a mortgage.
For the resident experts on ‘Entrepreneurship’ and small loan financing …as a complete stranger to the field of finance I would be interested in knowing their percetage failures and successes.
The cynic that I am I feel that what they lack in experience , they try to make up for that by passion and therefore the percetage success of small businesses is a measly 1 out of every 10!!!!!Thats why everybody fancies becoming a his own boss but ends up doing a job for entire life.
However the big question is how to generate money rather than try to see it grow by the old fashioned way of hoarding it in a piggy bank. How does an average person ( who is not a memon, bohri or dhedhi) convert his one rupeee into 1.25 or ik rupay aath anay. How do you separate wheat from the proverbial chaff??
Chill people, it’s just money. My cash portfolio is -53K $, my 401k rate of return for 2007 has gone down from 44% to 20% , my employee stock options have gone down -350K $ and all this in last two weeks :-(. What can I do ? Fuck GS, AAPL, RIMM, VMW, GRMN, EMC, MA, GOOG :-) but then again it’s just money. Up and down but never out.
You know I just need to burst out this rant :-(
My sympathies…I guess you too had actually believed what the media hype and accountants wanted you to believe.
If I had my way I would make advertisers and PR consultants swear on their own mothers before vouching on anything and still do the opposite.Because these two sectors would defy their existence if they ever happened to be factually correct.
@jamal shamsi
“Money is safe as all properties are under State owned property management board who ensure schedule completion or else payment of delayed charges as per rental law of UAE….”
dude, who told u all this?? almost every current every project is late and behind schedule and there is nothing any investor can do but to wait for it to coplete.
there is no payment for delayed charges as per UAE rental law!!!!!!!!!
who told you that??
@jamal shamsi
“Money is safe as all properties are under State owned property management board who ensure schedule completion or else payment of delayed charges as per rental law of UAE….”
dude, who told u all this?? almost every current project is late and behind schedule and there is nothing any investor can do but to wait for it to complete as all the firms govt owned!
there is no payment for delayed charges as per UAE rental law!!!!!!!!!
who told you that??
Try Karachi Stock Exchange, a few days ago even JP Morgan releated the report that Karachi Stock Exchange is the best place to invest, for all of those who are affraid of KSE, what i recommand is http://www.kse.com.pk from 9:45 am PST to 2:30 PM PST start observing it, focus should be on limited shares, watch CNBC and i am sure it will make you through and just to give you the idea focus on Cement Sector, Fertilizer, OiL and Gas Division and my personal Advice start monitoring Packages ltd share even if you are not interested in planning to buy just observe it for next few months and see what happens.
No offense…..but have you EVER seen anyone ( apart from memon and dhedis) making any money out of KSE.
JP Morgan may say all that she wishes but KSE is perhaps world’s most rigged Stock Exchange. Insider Trading is the NORM ….its all a big swindle …..the odds are always in favour of teh house…….have you ever seen any Stock Exchange which manages to loose its ENTIRE trading record ( due to a computer glitch) when SCE commission came looking for people who had blood on their hands for the last years carnage on the floor.
My humble suggestion…for enterpreneurs and new comers….before deciding what to do , one MUST learn what NOT TO DO in the jungle called Karachi.
@Khurram:
we’re thinking of investing in standard chartered’s Taleem fund for our child. Any suggestions on it?
http://www.standardchartered.com/pk/cb/insurance/ins_taleem.html
Like always devil lies in the details…everythinhg about the above mentioned scheme seems very eyecatching but the last few paragraphs are very very alarming.
Basically it seems that these are glorified mutual funds and the bank wants to say…does it mean that after we are sorry we can not give that much money ….we have squamdered it our worker’s salaries.
Jagtay rahna ….., mairay aasaray main mut rahna
For all of you who wants to invest, please read carefully the Definiton of a Busines and Businessman and pls focus on risk factor, and my friend Noum (is it a name ?) anyways whatever please grow up Karachi Stock Exhchange is not only for Memon’s and Chiniotis,its just they never thought that it was reserved for some specific cast, anyways you people can start investeing in mutal funds and let me add the information Mutual Funds are also depenedend on Stock Market but you can easily get 20% to 30% return at the end of the year.
Yes admittedly , being in an entirely different trade my knowledge about Business is literally zilch ….
So if this scheme by Standard Chartered is a mutual fund , it is dependent on Stock Market therefore the return is a hypthetical possibility….how can they then claim that figure will be awarded …….
20-30 % yield on mutual funds in Pakistan??????!!! is that based on information gathered by insider trading and tips from the board room?
@Ali Jafri…….> 20-30% return on mutual funds per anum?, Holy molly.I so want to invest in those mutual funds.Please do let us know little bit more.The portfolio i have its based upon my preference for medium risk and thus low rate of return as compared to other options.
Dee