From zero return accounts to crypto and pensions, asset selection will now determine outcomes
It will be the first time Pakistan will issue a 30-year euro bond in dollars, but the decision to sell it will depend on the interest rates investors seek. PHOTO: FILE
KARACHI:
2025 has been remarkable for many investors in Pakistan. The subcontinent’s long love affair with gold has once again translated into wealth creation for middle and upper income households.
Gold continues to serve multiple purposes: a store of value, a hedge against uncertainty, a wedding necessity, everyday jewelry, and for some, a convenient physical asset that avoids documentation, taxation, and the complexities of price discovery.
A relatively smaller but smarter group also benefited from the rally in silver, due to historical hedging potential and rising global industrial demand. Meanwhile, equity investors in Pakistan have had a great run, with the Pakistan Stock Exchange (PSX) returning almost 50% in 2025, after returns of 84% and 55% in the previous two years.
As investors look ahead, the key question is: what asset classes are available and relevant for 2026?
Current accounts
If you’re keeping money in a checking account, whether for religious reasons or out of sheer indolence, your first financial step should be to move it elsewhere. A checking account yields 0%, while banks use this money in government bonds earning 10-11% per year. Simply put, you offer an interest-free loan to the bank. A small change can make a substantial difference.
Savings accounts
Savings account holders are marginally more financially savvy, but returns remain limited. Savings rates are usually the SBP policy rate minus 1.5%, which translates to about 9% per annum today. Recent fiscal measures also mean higher taxation as income from savings rises, further reducing after-tax returns.
Low risk fixed income mutual funds
More financially savvy investors often choose low-risk mutual funds offered by reputable asset management companies. These funds provide liquidity, daily returns, professional management and usually slightly outperform savings accounts by investing in government securities and time deposits, although returns are net of management fees.
Investment Portfolio Securities (IPS) accounts.
For investors looking to cut out the middleman, an IPS account is a powerful option. Digitally enabled by the State Bank of Pakistan, IPS allows individuals to invest directly in government securities, earning returns of 10-11% while paying only a nominal fee. This reduces the bank’s spread and improves net returns.
Balanced funds
Investors who are not satisfied with fixed returns, especially during falling interest rate cycles, may consider balanced funds. These allow 30-70% equity exposure, offering higher potential for long-term growth at the expense of short-term volatility. Such funds suit investors with moderate risk tolerance and a medium to long investment horizon.
pension funds
For wage earners facing high taxation, pension funds remain one of the most underutilized tools. Contributions offer tax credits, long-term retirement benefits and disciplined retirement savings. The tax savings alone can be redirected towards improving lifestyle or reinvested for greater wealth accumulation.
Gold and silver
Precious metals do not increase indefinitely. Gold’s 2012 peak in USD terms took nearly eight years to retrace. However, given rising global debt, currency downgrades and persistent geopolitical tensions, gold and silver remain compelling long-term hedges rather than short-term trading instruments.
Crypto assets
Pakistan’s improved global engagement, particularly with the US, has reignited discussions around cryptocurrency adoption. The government is working on a regulatory framework that could allow citizens to invest in high-risk cryptocurrencies and stablecoins through regulated, user-friendly platforms. While volatility remains extreme, digital assets may emerge as an alternative store of value for a new generation of investors.
Real estate
Real estate investments have underperformed in recent years due to higher taxation, increased documentation, high interest rates and official valuations that are close to market rates. That said, for people looking for housing or rental income, real estate remains important. Tax credits associated with mortgages, especially for properties under 2,000 square feet (apartments) or 2,500 square feet (homes), enhance long-term sustainability. Don’t leave free taxes on the table.
Direct investments in shares
Despite the PSX’s sharp upgrade from 3x P/E to around 8x, there are still opportunities in dividend yielding and growth stocks. Investors can focus on sectors they understand such as IT, banking, oil and gas, fertilizers, cement and steel and adopt a monthly investment strategy through digitally enabled brokerage platforms, benefiting from dividends and long-term capital appreciation.
Wherever you choose to invest, remember that this is your hard-earned money – built with time, effort and discipline. Financial literacy should be embedded in schools, universities and workplaces to empower people to make informed decisions.
This is not investment advice. Thorough research and prudent risk assessment are essential. Higher risk can provide higher long-term returns, but diversification remains key. Avoid putting all your eggs in one basket. Align your investments with your income, expenses, financial goals and risk tolerance.
No financial avenue is better than investing in your health, family, faith, education and self-promotion. Invest in your passion to turn it into a season of entrepreneurship while you can take risks. As we enter 2026, let’s commit to being smarter financially.
THE AUTHOR IS AN INDEPENDENT FINANCIAL ANALYST
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