Take Responsibility for Yourself and Your Financial Future!

Investors are able to purchase and sell common stock market of listed firms as well as other securities on the PSX. Which is a dependable, well-ordered, liquid, and highly efficient digital marketplace. Do you have some spare cash and money lying around that you could spend? However, what if you choose not to? We will walk you through how to save some money and what to do with the money that you have leftover.

Imagine you have a job that requires you to work from nine to five and pays you Rs. 100,000 per month. Not quite as much, not quite as little! On the other hand, it possesses a wide range of applications. Beginning to save money and put it into investments is one of the most beneficial things you can do with it. Start putting away 20% of your monthly salary right away. It is recommended that at least 20% of your salary be set aside in savings at all times.

Don’t let all that cash sit there doing nothing. It would be simple to invest this money in mutual funds. Historically, mutual fund investments have generated a decent return of 8-10% annually. If you save and invest Rs. 20,000 every month for a year in mutual funds and the rate of return stays the same at 8% per annum, you will have Rs. 240,000 in principal and Rs. 14,400 in profit at the end of the first year.

Now that we have this money, what do you intend to do with it? Should you keep putting money into mutual funds in the hopes of earning enough to stay up with inflation (the headline consumer price index was 6.2% on a year-over-year basis as of December 2018*)? You may find that this is insufficient.

And what if you decide you need or want to put that cash toward anything else instead? Is it appropriate to present your wife a state-of-the-art stereo system, a home theatre setup, a wardrobe update, or a piece of fine jewellery on her birthday? There needs to be a rethink if this is how you are thinking.

You are aware that there are a lot of things that you are capable of accomplishing with your money, but there isn’t much that you can get out of it if you just let it sit there unused or spend it right soon. The story will turn out to be a financial disaster. What about turning this into a story that makes money?

First and foremost, always have some cash set aside for unexpected expenses. Who can predict what will go place the following day? There is always the possibility that you or a member of your family could fall victim to an unexpected sickness, an accident, or a serious condition. What happens if you get into an accident with your automobile, and you don’t have the money to fix it. Nor do you have insurance to cover the cost? You are going to need some money for that objective. In a nation where a respectable mode of transportation is virtually nonexistent. This is the point at which your emergency finances will come in handy and assist you in times of medical emergency or when you are unable to go around (as a result of damage to your vehicle). So keep some dollars aside for your emergency needs.

Second, put some of this money toward paying off any outstanding bills or obligations that you may have. Your monthly paycheck might have to take a significant cut to pay the obligations for your credit cards. Pay off all of your obligations, and you will be free. If you have any loan payments or instalments on your car or your property, attempt to clear off a large part of these payments without reducing your savings all that much. This is especially important if you have any loan payments against your car or your house.

You can now make effective use of the money that you have painstakingly saved and invested, which is the third and most essential benefit. But how exactly can you make the most of the money you have? The solution lies in making further investments. The modern investor can choose from a variety of asset classes that each provide the potential for satisfactory returns. There are several other types of investments available to you. Including Savings Certificates, Treasury Bills, PIBs, Commodities, Money Market, Mutual Funds, and Stocks. Every type of asset has both advantages and disadvantages. If you keep your money in savings accounts, you won’t have to worry about losing it, but you won’t see any return on it either.

In the case of savings certificates, even though the returns are on par with other investment options. Your money could be stuck there for a considerable amount of time. When it comes to bonds. The rates of return are competitive, but there may be some restrictions regarding the duration of the investment and other factors. The stock market has consistently produced the highest returns over time compared to the other asset groups. The graph that can be found below demonstrates this point. (PIICCC)

The stocks that make up the KSE 100 Index have, on average, generated a return of 20.2%** CAGR (Compound Annual Growth Rate). Over the course of the previous ten years and approximately 15.13%*** CAGR over the course of the previous fifteen years. These numbers hold up fairly well when compared to the returns obtained from other types of investment vehicles.

Investing in the stock market requires you to first open an account with a brokerage firm, after which you can select the firm with whom you will conduct business.  Because stock or equity mutual funds contain a pool of diversified portfolios of stocks that are managed by professionals, investing in mutual funds combined with direct equities or the stock market is a smart idea due to the fact that stock or equity mutual funds comprise a pool.

If you invest Rs. 150,000 and let it compound over several years, you might be able to make a decent profit. Investing this money for five years at a steady rate will yield a return of Rs 376,369/- (+). You can use this as an alternate strategy to putting the money away for the future. This is twice as much as you had before!

This shows that investing in the stock market is not just superior than investing in any other asset class historically, but it will also protect your savings against inflation. Stocks are a superior investment than other asset classes. If you invest 20% of your salary for one year in the stock market (and/or mutual funds). You’ll earn Rs 376,379 (+) after five years. This will help you to save for unforeseen needs, pay off debt, and invest. Improve how you save and invest money, and invest in the stock market.

* (Source: SBP) / **(Beginning in January 2009 and Ending in December 2018)/ *** (Dec 2003 to Dec 2018; Source: Bloomberg) / + (@ 20.2% CAGR)

Disclaimer: This article’s content about securities, derivatives, listed businesses or possible PSX listings, and third-party content is generic and meant to educate readers. PSX does not promote, suggest, or indicate the benefits of the product, security, or company. Such content and information should not be interpreted as exhaustive of all regulatory rules.

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