Pakistani investors face choices between gold, stocks, and cryptocurrencies in a bullish market. The KSE-100 index has surged significantly, while gold prices have increased. Investment experts advocate for a balanced portfolio, emphasizing the importance of risk tolerance and time horizon, with stocks being a preferred option for growth.
The financial landscape in Pakistan has gained momentum, with the stock market experiencing a significant increase. The Pakistan Stock Exchange’s KSE-100 index saw an impressive rise of 84 percent in 2024, showing a further increment to 117,806.75 points from its closing figure. Furthermore, gold prices also surged, reaching Rs325,000 after a notable gain earlier in the year. Amidst these developments, investors are contemplating where to allocate their resources: gold, stocks, or cryptocurrencies.
Investment banker Mustafa Fahim advocates for a diversified approach, stating that a balanced portfolio should include gold, stocks, and cryptocurrencies. He emphasizes that asset allocation should be tailored to individual circumstances, such as age and risk tolerance. Young investors may consider allocating around 10 percent of their portfolio to cryptocurrencies, while maintaining a heavier reliance on stocks, particularly index funds, which historically outperform other asset classes in stable environments.
Shankar Talreja from Topline Securities expresses optimism about the stock market’s potential for growth. He notes that the market currently enjoys an earnings multiple of 5.5x, indicating a notable upside beyond its historical average. The upcoming International Monetary Fund (IMF) review is expected to boost investor confidence further, suggesting that stock investments could yield attractive returns.
On the topic of gold, Talreja suggests caution due to elevated worldwide prices, indicating that returns may not be as robust as in the past year. He observes that while gold is traditionally seen as a safe investment amid uncertainties, the current economic landscape may favor equities over gold investments.
Research analyst Muhammad Usman Siddiqui echoes these sentiments, noting that while gold offers stability in tumultuous conditions, equities present a better investment opportunity in Pakistan, given the affordability of blue-chip shares. He suggests a potential allocation of 50 percent in gold, 40 percent in equities, and a minor allocation to cryptocurrencies.
An anonymous small investor highlighted the accessibility of stocks compared to gold, which necessitates large capital for investment. He emphasizes that the stock and crypto markets have lower entry thresholds, allowing investors to begin their journey with a smaller investment.
Fahim regards gold as a stabilizing asset within a portfolio but cautions against allowing it to dominate due to its historically lower returns compared to stocks and cryptocurrencies. He believes that Bitcoin holds promise as the leading cryptocurrency and should represent a minor portion of investments. Talreja also advises exercising restraint with cryptocurrencies, which remain a volatile and uncertain investment choice.
Despite skepticism from financial experts regarding crypto investments, unofficial statistics indicate a growing number of crypto users in Pakistan. However, the level of actual investment in cryptocurrencies compared to stocks remains a topic of debate.
Fahim critiques the inflated estimates of crypto users, asserting that many utilize cryptocurrencies for transactions rather than investment purposes. He attributes the low participation in the stock market to a lack of financial literacy and a preference for traditional investment avenues like gold and real estate. He expresses hope that increased education and resources will shift perceptions towards the stock market.
In conclusion, while the stock market presents opportunities for substantial returns, particularly for younger investors, gold continues to be a prudent choice for stability. Cryptocurrencies, while emerging, require cautious engagement due to their high volatility. Individual investment strategies should reflect personal circumstances, allowing for a well-rounded portfolio that aligns with one’s risk appetite and long-term goals.
In summary, Pakistani investors are faced with pivotal choices regarding gold, stocks, and cryptocurrencies. Although gold maintains its status as a reliable asset in turbulent times, the stock market emerges as a favorable investment option due to its potential for higher returns. Cryptocurrencies, while gaining traction, remain uncertain and are best approached with caution. Ultimately, individual investor profiles should govern asset allocation decisions to optimize growth while managing risk.
Original Source: www.thenews.com.pk
