Over the last few days, a few people I know in Pakistan are seeking advice on what are some good investment opportunities in Pakistan, which can provide relatively stable monthly income.
These are retired people, who can not manage businesses or keep track of stocks. They are looking for low-risk, average return, monthly income schemes. As I understand, they had funds invested in National Savings Schemes, but since the govt. has reduced the profits so low, hence these have become quite unattractive.
Real estate is a long-term investment, and not suitable for monthly income purposes.
Right now the stock market is up and up.. and seems like it is bound to go down, even if it will be a technical correction. Mutual funds are probably a better option for those who can’t keep track of individual stocks. I have heard UBL offers some good returns on their mutual funds. True or not?
What are some of the more viable investment opportunities in Pakistan?
I am personally looking into buying a gas station. My limited research shows that it costs around one carore rupees, (US $ 172K) and the ave monthly income is around 3 lakh rupees (US $ 5000). After taking out the costs (wages and all) lets say an income of US$ 3000 gives you a return of about 20% anually. This does not include taxes, so take that out and you will still have a decent income. The beauty of a gas station is that you do not have to market your product.
This to me sounds like a good way of making money with the least amount of input/ supervision.
how about investing in US bonds? would that be a suffient and steady real income level they could live with? Been in US$ it would atleast protect against the high inflation developing countries can fall into.
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*Originally posted by Faisal: *
Ahad, are you seriously recommending a 75 year old retiree with some funds to go buy a gas station?
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To tell you the truth I don't know about a retiree. What I know is that if I start a business, my input will be very minimal, being away. I will have to have somebody that I can trust to run it for me. I am willing to pay a better than normal salary for supervision to a relative/ acquaintence who is young and does not have the skills or the sifarish to land a decent job. The retiree will be in the same position as me (albeit different reasons), as far as input is concerned. It depends a lot on the temperament of the person as well. I do not see my father doing something like that. He has worked in an office all his life and just does not have the right business acumen or patience to deal with people. However, I have some good friends who are welay and will jump at the opportunity. In pakistan, gas stations are not run by the owners, hence my suggestion to you.
Mutual funds are a bit tricky, particularly when you are talking about an economy like Pakistan. Bonds and fixed income schemes I do not believe in so I will not suggest those to anyone.
hmcq: Investing in US$ bonds (i am assuming you are referring to the product that was forcibly given to US Dollar deposit holders after the '98 blast) surprise surprise! what they offer in return is not even worth mentioning-they barely suffice in terms of ROI and are more of a storehouse for value of money. In addition, with the rupee stable for quite sometime (and with the forex reserves at an all time high, is expected to be so for the foreseeable future), the exchange rate risk (for which you are proposing the dollar bonds) is greatly minimized as it is.
Ahad: Not a bad choice. Location decision may be important though. The CNG industry however is dangerously vulnerable to the govt. policies. They are favorable at the moment but if and when the govt decides to impose additional import duties on CNG kits and increased tariff for CNG itself, the economies may go down the drain. Par bura nahin hai waisay.
Faisal: Mutual funds is the answer. In the stock market, its the retail investor (small fish) who always takes the beating. It also does not fit in line with the investment objective of the market you defined-retirees who are more interested in preservation of their principal investment coupled with moderate returns.
I suggest two options:
Listed Term Finance Certificates (TFCs) which is rated Corporate Debt
Money-market or income funds
Equity (shares) Public offerings (IPOs)
TFCs are a good investment :k: they are rated corporate debt (rated by reputed national credit rating agencies PACRA/JCR-VIS)-offer good returns too…generally in the range of 6.00%-14.00% Aaj kal low interest rate ki waja se kam kam tfc issues aa rahe hain waisay. But they are a safe investment heaven.
2)UBL offers United Money-market fund (http://www.uamcl.com). The site can be checked for daily NAV and FAQs are what needs to be read to understand how it works. (Btw i was part of the fund development team :D) Last year the annualized return was 10% p.a. This year it is going to be lower given the low interest rate environment but we have consistently beaten the benchmark deposit rates by at least 1-2% p.a. There are other mutual funds in the market too. Arif Habib has a couple of funds too (http://www.arifhabib.com.pk) which cater to investors with different investment objectives. They have special schemes for retirees, child eduction and a couple of others. Pretty neat.
With equities at an all-time high, there have been a couple of equity ipos (shares offering to general public) that have been heavily over-subscribed. Plenty of opportunities to make some serious capital gains. More equity issues are in the pipeline. Ask your folks to keep reading Business Recorder/DAWN/Jang…poore poore page ki abridged prospectuses aati hain. Mind you, i am talking only from a capital gains perspective..warna generally nai equity ipos dividend forun nahin dete..i am sure you’d know better.
Baaqi bhi kuch achay funds hain. Chahiay hoon to batana :~)
real estate is iffy as an investment, especially was in the past with tenant or takeover problems, but with the demand increasing, there may be some great investment options in real estate.