Let us dare open with the infamous Warren Buffett quote: Do not save what is left after spending, but spend what is left after saving. Because if you do not take our word for it, you must pay heed when the advice is coming straight from none other than the world’s 4th wealthiest person himself.
But if you have acted upon our previous piece on savings and have started to save already, it’s time we moved on to the next step: what to do with your savings because money sitting in cash will eventually lose its value. So, it’s time to invest your little nest egg in a safe place so its value only appreciates as time passes.
Here are some useful tips on how to invest your hard-earned savings.
TIP: Invest wisely and carefully!
No, we’re not just stating the obvious. And even if we are, the point merits reiteration. You have spent years of hardship to bring your savings into some shape, so we know how much that money matters to you. Being thorough before choosing to invest it somewhere won’t hurt at all.
Look around, study the local markets, see what’s worth what, and how the trends are changing. Seek help from family and friends to make an informed investment decision that’s both safe and lucrative. But always remember that investment doesn’t always come completely risk-free.
One option to invest your savings in is a savings account in a commercial bank. Today, most Pakistani commercial banks offer a 5.5% – 6% APR with no minimum balance requirements. Profit payouts are usually done on bi-annual basis and there’s no requirement for initial deposit either.
National Savings Accounts
Savings Account (SA) is the oldest/primeval offering of the National Savings with a product design to encourage the small savers to invest in a way that helps them meet their day-to-day financial needs. The present annual profit rate is 5.50% per annum.
National Savings Certificates
Savings Certificates offered in different denominations with varying maturity durations offer a unique investment opportunity for small and medium savers to meet their periodic financial needs. The present annual profit rate for different denominations and durations is between 6.8% and 7.2%.
Prize Bonds is gold investment and are bearer type of security available in the denominations of Rs. 200, Rs. 750, Rs. 1,500, Rs. 7,500, Rs. 15,000, Rs. 25000 and Rs. 40,000. These Prize Bonds are issued in series. Each series consist of one less than 1,000,000 bonds. No fixed return is paid but prize draws are held on a quarterly basis.
One of the prime investment options is real estate as they’re a surefire way to turn savings into huge profits. Property investment, however, has some downsides to it that include hefty investments and long maturity periods. Plus, since real estate is not a liquid asset, you need to sell the whole thing even if you need some little cash.
The reason why savvy investors choose stocks over other investment options is that they provide the highest potential returns. When done right, you can grow the money you invest by anywhere from 7% – 10% per year over the long term. But stocks also have their downside: they tend to be volatile investments with their value fluctuating in the short-term.
The mutual fund is the collective investment that pools together the money of a large number of investors to purchase a variety of securities like stocks or bonds. The investment is made on your behalf by an asset management company (AMC) that is duly licensed by the Securities and Exchange Commission of Pakistan (SECP). For those who have never invested before and have the cash that they can set aside for a couple of years, mutual funds make for a good investment option.