1. The Rise of Digital Insurance Platforms

Technology continues to play a pivotal role in the evolution of Pakistan’s insurance sector. Digital insurance platforms are gaining traction, offering consumers a seamless experience to compare, purchase, and manage policies online.

There are several insurtech platforms in Pakistan now that are making life easier for customers. They can find customized insurance plans, whether it’s health, auto, or life insurance. This shift not only enhances convenience but also increases transparency, allowing consumers to make more informed decisions.

 Why This Matters:

• Reduced paperwork and faster processing times.
• Broader reach to underserved and remote areas.
• Enhanced customer support through AI-driven chatbots.

 2. Microinsurance Expansion

Microinsurance is emerging as a game-changer for low-income populations in Pakistan. With a significant portion of the population still uninsured, microinsurance provides affordable and accessible solutions to protect against risks such as health emergencies, crop failure, and natural disasters.

 Key Developments in Microinsurance:

• Partnerships between insurance companies and fintech firms to distribute low-cost policies.
• Increased awareness campaigns to educate rural populations about the benefits of microinsurance.
• The use of mobile payment platforms for premium collection and claims settlement.

Example:

Companies like Telenor Microfinance Bank have already pioneered mobile-based microinsurance products, enabling financial inclusion at scale.

 3. Focus on Health Insurance Post-Pandemic

The COVID-19 pandemic has permanently altered how Pakistanis view health insurance. In 2025, health insurance remains a top priority, with providers introducing innovative policies tailored to meet diverse needs.

 Current Trends:

• Telemedicine Integration: Many health insurance plans now offer teleconsultation services, enabling policyholders to access healthcare remotely.
• Preventive Care Coverage: Policies are evolving to cover preventive measures like annual check-ups and wellness programs.
• Family-Focused Plans: Insurers are targeting families with bundled plans offering comprehensive coverage at competitive rates.

 Tip for Consumers:

Evaluate plans for their hospital network, ease of claim processing, and value-added services like 24/7 medical hotlines.

 4. The Rise of Takaful (Islamic Insurance)

Islamic insurance, or Takaful, continues to gain popularity in Pakistan. Offering Shariah-compliant coverage, Takaful appeals to individuals who prefer ethical investment options aligned with Islamic principles.

 Key Features of Takaful in 2025:

• A growing number of operators offering both family and general Takaful products.
• Collaboration between banks and Takaful companies to provide bundled services.
• Enhanced digitalization of Takaful services, improving accessibility and customer experience.

 Fun Fact:

Takaful now constitutes a significant share of the overall insurance market in Pakistan, with double-digit growth expected this year.

5. Customized Auto Insurance Policies

With the rise in vehicle ownership and increasing road traffic, auto insurance is becoming a necessity for many Pakistanis. In 2025, customized policies are in high demand, catering to specific needs like ride-hailing drivers, electric vehicle (EV) owners, and first-time car buyers.

 Notable Trends:

• Pay-As-You-Drive Insurance: Premiums calculated based on driving behavior and mileage.
• Coverage for EVs: Policies designed to include battery replacements and charging station support.
• Add-Ons: Optional features like roadside assistance and zero depreciation coverage.

 Pro Tip:

Drivers can save on premiums by maintaining a clean driving record and opting for higher deductibles.

6. Climate Insurance: Preparing for Natural Disasters

Pakistan’s vulnerability to climate change and natural disasters has underscored the importance of climate insurance. Floods, droughts, and extreme weather events pose significant risks to lives and livelihoods, especially in rural areas.

 2025 Developments:

• Expansion of crop insurance programs to protect farmers from losses.
• Introduction of weather-indexed insurance, where payouts are triggered by predefined weather conditions.
• Collaboration between the government and private insurers to subsidize premiums for vulnerable communities.

 Why It’s Important:

Climate insurance not only provides financial relief but also encourages sustainable practices among farmers and businesses.

7. The Impact of InsurTech Innovations

The fusion of insurance and technology is known as InsurTech. This is driving efficiency and innovation across the industry. From blockchain to artificial intelligence, these technologies are transforming how insurance is bought, sold, and managed. Developments mentioned below are in international markets.

Notable Innovations:

• AI-Powered Claims Processing: Reducing claim settlement times from weeks to days.
• Blockchain for Fraud Prevention: Ensuring secure and transparent transactions.
• IoT-Based Monitoring: Devices like fitness trackers and car sensors provide real-time data to tailor premiums.

What’s Next:

Expect more personalized products and dynamic pricing models based on real-time consumer behavior.

8. Enhanced Consumer Education and Awareness

As competition increases, insurance providers are investing in educating consumers about the importance of coverage. Awareness campaigns through social media, community outreach programs, and collaborations with influencers are becoming commonplace.

Key Focus Areas:

• Busting myths around insurance being too expensive or unnecessary.
• Highlighting the long-term financial security benefits of insurance.
• Simplifying policy language to make it easier for consumers to understand terms and conditions.

A Step Forward:

These efforts are empowering consumers to make well-informed decisions, contributing to higher insurance penetration rates in Pakistan.

 Conclusion: A Dynamic Future for Insurance in Pakistan

The insurance industry in Pakistan is at an exciting juncture, with 2025 bringing a mix of innovation, inclusivity, and resilience. Whether you’re a first-time buyer or looking to upgrade your existing coverage, staying informed about these trends will help you make better financial decisions.

From digital platforms to climate insurance and the growing popularity of Takaful, the landscape is evolving to cater to diverse needs. If you’re ready to explore your options, platforms like Smartbenefits.pk are here to guide you every step of the way.

Ready to secure your future? Start exploring today and embrace the benefits of modern insurance solutions.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Insurance Trends in 2025: What’s New in the Pakistani Market? appeared first on Smartchoice.pk.

Without insurance, our dependents can face deep financial hardship if we are unable to work and the dependents are too young to work (or unable to) due to an unfortunate event.

Health insurance is designed to cover common medical emergencies. Making it a part of retirement planning is more critical as you negotiate inflation and the risks of health issues that may even be prolonged in your old age.

Why Insurance is Important

Insurance is not just a security net against emergencies; it can also be a strategic tool in the financial portfolio of retirement planning. By carefully selecting and managing your insurance policies, you can protect against economic risks and create additional sources of retirement income. As you navigate the path to retirement, consider how insurance can play a role in securing the lifestyle you envision for your golden years.

Medical Emergencies

A significant reason to prioritize health insurance is the unpredictability of medical emergencies. Medical treatments can be expensive, especially in major surgery or long-term hospitalization. The medication costs of major ailments shoot up over time, creating significant pressure on your savings.

Financial Protection

People who prioritize health insurance coverage ensure their financial protection in medical crises. They get a safety net, shielding retirement savings from being depleted due to hefty hospitalization bills. 

Reduced Premiums 

Generally, the younger you are when purchasing health insurance, the lower the premiums you pay. Starting financial planning early in your working life allows you to take advantage of the power of compounding as savings have more time to grow and accumulate. It can result in significantly larger retirement funds.

Health insurance companies tend to offer multiple benefits to long-term policyholders, including no-claim bonuses offered to those who don’t make claims during a specific period and cumulative bonuses that reward policyholders for maintaining continuous coverage, with increasing benefits and so on. Retirees can unlock these additional benefits by staying committed to a health insurance policy over the long term, bolstering their retirement planning. 

Opting for a higher insurance cover is a good start, as a higher insurance cover protects retirees against inflationary pressures on medical treatment and procedures. 

Medical Insurance as an Investment Tool

Insurance is the cheapest way to protect against any emergency. Fixed-term insurance is a kind of life insurance that provides coverage for a fixed time. If you die during the policy’s fixed period, the insurer will pay a predefined amount to the beneficiaries. 

However, if such an event does not occur, it leaves some residual value to you or your dependents at its maturity. If you have enough of this type of coverage, it can be a sufficient source to replace the income you lose when you retire, and you can replace the lost revenue through the predefined amount you receive.

However, insurance is a tool that effectively offers a lot more than ticking off boxes. If you are smart enough to use more sophisticated strategies, insurance can help you reach your long-term financial goals.

Long-term care and cash-value life insurance are good tools to help reinforce your retirement plan. With their tax treatment and risk mitigation features, many investors can improve their chances of ensuring that they have enough retirement funds to maintain their lifestyle throughout their retirement and meet their financial goals by including these kinds of policies in their long-term plans.

Financial Planning with Insurance 

Finances and goals are interrelated, so using insurance as a financial planning and long-term investment strategy will affect how structured and invested your assets are with such policies. 

Insurance can be a crucial component of retirement planning, but it is part of a broader financial plan that should include savings, investments, debt management, and estate planning. A well-rounded approach to retirement planning ensures a balanced and broad-based plan for your retirement years.

You can purchase some basic insurance policies through your employer and a wider variety through insurance platforms and agents. You just need to ensure that you are buying policies from high-quality issuers and reliable platforms that offer premiums you will be able to afford and that match your financial plans. 

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post The Role of Insurance in Retirement Planning  appeared first on Smartchoice.pk.

About Inflation

Inflation is the general rise in prices of goods and services over time. It reduces the purchasing power of money. This means that the same amount of money will let you buy lesser goods or services. As a matter of economic policy, central banks and governments try to keep the inflation rate under a certain limit to ensure price stability in an economy and stimulate economic growth.

The Role Interest Rates Play

Interest rates are the price of borrowing or the earnings on savings. A country’s central bank usually sets interest rates. Interest rates usually play a key in influencing the overall level of economic activity. This makes them a useful tool for central banks’ manipulation of their economic policy. When there is a need to stimulate economic growth, central banks lower interest rates, making it easier to borrow money. Similarly, when central banks want to slow down an economy that is expanding too fast, they raise interest rates, which makes borrowing more expensive.

The level of interest rates has a deep impact on the economy and, eventually, on employment prospects. Interest rates usually rise when the economy grows rapidly, and the labor market is strong.

By demanding higher rates, the economy implies that it anticipates future inflation along with high economic growth. In such an environment, the central bank may take steps to push rates higher. This is done to slow down economic growth and reduce inflation.

This rise in interest rates can be influenced by inflation, the level of the stock market, and other factors and may not always be a regularly rising line.

The Relationship between Inflation and Interest Rates:

Inflation and interest rates are interlinked parts of an economy. Higher inflation usually leaves money more in demand, which leads to higher interest rates. Similarly, lower inflation means that there is surplus money around, which reduces interest rates. This connection remains because interest rates are adjusted to accommodate the reduction or improvement of purchasing power (this is linked to inflation).

As inflation grows, lenders and investors require higher interest rates to balance the expected decline in money’s value over time. Conversely, when inflation is low, interest rates can be lower since there is less need to offset the effects of diminishing purchasing power.

In simpler terms, interest rates are the price we pay for borrowing money. In high inflation, money becomes expensive, and interest rates rise.

In low inflation, prices, and interest rates also fall as money becomes easily available.

What the Connection Means for Borrowers

As a borrower, inflation and interest rates play a major role in your financial decisions. When an economy has a high inflation rate and rising interest rates, borrowing money is more expensive. For people with floating-rate loans, such as KIBOR-linked mortgages or car loans, repayment installments can rise due to higher rates. This leaves budgets straining due to higher repayment requirements.

On the other hand, borrowing is more affordable in economic periods with low inflation and low-interest rates. Fixed-rate loans are especially attractive in such times, as borrowers can fix a low-interest rate for the duration of the loan, protecting themself from interest rate hikes in the future.

As borrowers, it is important to know that inflation can reduce the value of debt over time. As prices rise, the actual or real value of the outstanding loan falls. This is beneficial if the borrowing has been done at a fixed interest rate, as you will repay the loan with cheaper (devalued) money in the future.

What the Connection Means for Savers

For savers, inflation and interest rates imply different things. When inflation is higher than the interest rate on savings, the purchasing power of your savings decreases. For example, if you are getting a 14% interest rate on your savings and the inflation rate is 15%, your money is not growing enough to keep up with rising prices. In fact, it is losing value at the rate of 1% (15%-14%)

For savers, looking for investments or savings accounts that offer higher returns makes more sense. Such returns will hopefully remain above the inflation rate. Doing this is necessary to keep the value of savings and purchasing power above the inflation rate.

The savings returns will also be low in periods with low inflation and low-interest rates. This usually encourages savers to look into other investment opportunities that offer higher returns, like stocks, bonds, commodities, or real estate.

Conclusion

Understanding the connection between inflation and interest rates is important for borrowers and savers. As a borrower, knowing how inflation and interest rates impact the cost of borrowing will help you make better-informed decisions about the types of loans you choose. As a saver, understanding the effect of inflation on your savings can guide your investment choices to retain your purchasing power.

It is important to remember that economic conditions can alter, resulting in inflation and interest rate changes. Staying current with economic developments and reassessing your financial strategy should let you modify your investments according to changing scenarios.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Inflation and Interest Rates: What you need to Know as a Borrower or Saver appeared first on Smartchoice.pk.

With prices of almost every daily use commodity increasing month after month, and all rising above last year’s levels, people are faced with tough decisions.  Petrol, food, groceries and utilities are all adding up to high jumps in the outflow of money.

This makes it critically important to reassess your budgets and see where and how your money is being spread out. To learn how to budget in an inflationary economy, visit our blog 10 practical ways to fight growing inflation in Pakistan

 Review Prices

The inflationary situation means that the budgets we are using up to now will most probably not be effective. Since inflation affects the prices of commodities differently, we all need to readjust our budgets, accordingly. For instance, working people that ordered lunch and meals from home chefs, or canteens may find that the delivery charges are too high to make economic sense anymore.

Car and bike pooling is becoming a norm as people start to pool rides to work to save fuel money. This is a practice that should have started long ago, but it is better late than never. There are apps to facilitate this.

The best option is to keep an eye on the prices and make sure that you spend money practically. This can be as easy as eating less meat, and more veggies, spending less on outings and weekend treats and managing expenses to make sure that savings aren’t reduced due to inflation.

Make Budgeting the Norm

With surging inflation showing no promise of reducing, there is little to indicate that grocery bills will not continue to rise, and stock markets are volatile.  The only thing we can do is to apply means to reduce the pressure on our budgets.

This can be done by separating expense items into needs and wants. Needs like food and utilities, and rent cannot be reduced, but wants like having meat every day, and getting your 7-year-old tutored for homework every day is a wants. Taking kids for outings to malls, and play areas is also want. You can take kids to parks and increase the frequency. Play with them in parks so that both parents and children get their exercise and fun.

In cases where spending cannot be avoided, to control expenses, you can trade down and trade sideways. For example, trading down means buying less expensive brands for a compromise on quality. Trading sideways means buying from a brand of equal quality, but with lower prices.

Both these options are available around us and applying these choices allows us some breathing room in our limited budgets. For example, mangoes may be too expensive right now, so buy fewer mangoes and buy more peaches or grapes. Similarly, buying from a superstore is usually more expensive, so go to the local kiryana store and buy open produce for lower prices.

Reduce eating out and when you do eat out, opt for lower-priced options. As inflation remains high, consumer confidence is falling. But remember that even if the inflation rate is high, your own personal experience could be different.

We all have our own personal inflation. If you live in your own home and live within your means, then your inflation rate will be much less than the overall average, which gives you more room to save.

Budgeting and planning are the need of the hour, but for those that are already following a regulated budget, it is nothing new or drastic.

If you are new to budgeting, sit down and think about your income and additional financial inflows and where you need the money to go. Then, take a look at your spending and see if it aligns with those values.

Start with a budgeting exercise, take your take-home pay and leave 50% for living expenses and utilities, 20% for leisure and miscellaneous, and 30% for savings, where possible. for the single people living with their families, this is a doable ratio, while those managing families on their own could find this challenging.

Increase Savings

Regardless of how much inflation is affecting your income, budget for savings and you’re your best to continue saving. When you are reviewing your budget, see if you can set aside a small amount each month to start building up an emergency fund. Even putting Rs. 1000 in such an account each month starts you off on the right track towards better financial habits in the future.

Once you have that safety net, you’ve earned the right to invest more or pay down more debt

The returns from a savings account will never be enough to plan a savings fund. To manage your savings to be sufficient for emergencies, you must look into the various savings plans offered by mutual funds, insurance, and investment companies.

Saving through a financial institution should yield better returns than a savings account. Returns on money placed in savings certificates and fixed deposit accounts are usually much better than saving accounts.

Investing in a savings plan for your children can seem to be overwhelming in the current economic scenario but doing so means that you are planning realistically for future expenditures. Having a focused savings plan would yield returns as and when you need it.

Most insurance companies offer policies that let you save up for children’s education and marriage expenses. Many companies also offer options to include emergency withdrawals or to get an additional policy to cover medical expenses

Conclusion

Like many other challenges in life, inflation can be met with some common sense, a lot of realistic financial planning, and making sensible, researched financial decisions.

Knowing that expenses are going to increase and planning for their increase would make it easier to manage them. However, regardless of the state of the economy, it is advisable to shop around for a savings scheme with any insurance company that allows you to save for any unexpected event like a sudden illness, or unemployment period and plan practically for the rising costs of living.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Managing Budgets In A Hyper Inflationary Environment appeared first on Smartchoice.pk.

Retirement Planning

A conversation with most working professionals will show that many of us dream of retirement and leaving the 9 to 5 life behind us. We all aspire for a happy and relaxed retired life and many of us are willing to plan for it.

Retirement goals are fairly standard and most working professionals have some form of retirement plan.  This can be supported by the workplace or can be independent of whatever the workplace retirement plans are. However, what we all need to bear in mind is that real-life retirement can turn out to be very different from what most of us imagined.

The reality checks most retirees face are due to poor financial management and a lack of investment planning. While there are a lot of retirement plans available in the market, having one and relying on it exclusively is not a good plan.

Many other factors will impact your retired life and how it treats you.

Factors to Consider For Retirement

A serene retired life is dependent on 3 major elements, the retiree’s social life, financial condition, and age. Retiring early with a strong financial position, and a good social circle is an ideal goal.

How can we go about achieving this?

1. Financial Stability

To plan for retiring in a stable position, there is a need for a strong financial retirement plan. There are many suitable retirement insurance plans in Pakistan designed to help you retire with ease. However, you need to choose your plans wisely. Bear in mind that even the best retirement insurance plans in Pakistan will not be enough to cover all your financial requirements by the time you are ready to retire.

The factor of inflation is something that cannot be included in the most comprehensive retirement or investment plans. This is something that can be planned out through a customized plan built with a financial consultant. As a base rule, the most comprehensive plan should include some investment in shares and other assets. Out of the proportion of stocks, some should be dividend stocks, and others should be growth stocks.

2. Social Life

Social life is not fully controllable, but something that can be controlled to some extent. People planning for early retirement need to have a social life to rely on once they are free from the 9 to 5 routine and have an idle life. There will be an increased need for meaningful interactions. These need to be cultivated way before the retired life is expected to start. In most cases, we cannot control the people we retire with but if we have time. So, by cultivating meaningful friendships before you retire, you’ll have a better social life when you finally call it quits.

Another perspective of social life is charity or social work. Social work and charity add perspective as well a social perspective to anyone’s life.  Social and charitable endeavours help add busyness They also have a bigger friend circle and stay busy doing things that interest them during retirement.

It is a good idea to start by doing volunteer work in orphanages or part-time tutoring to practice giving back to those less privileged. Investing time in such endeavours will pay off in the long run and help an alternate social life to keep yourself occupied after retirement.

3. Retirement Age

The age at which a person retires plays a significant role in how rewarding they find their retirement.  60 is the average age for retirement, but this can vary from person to person. For the very ambitious, the retirement age can be settled anywhere in the late 40s to 50s. this much younger age is set for those that are certain to save up enough to have a settled, happy retired life.

If you prefer to stay busy, you may extend your retirement age by retiring later to enjoy work for longer. Having an alternate lifestyle ready to keep you busy is a good option and necessary to plan a life post-retirement.

Bear in mind that the majority of financially stable retirees aren’t necessarily rich, and not all of them are in high-paying jobs. However, these are people that know how to manage finances and create a comprehensive plan to retire happily.

How to Prepare for a Retired Life

If you’re financially covered with the best retirement insurance plans in Pakistan, then half of your worries will already be covered. However, you’ll have to consider a few other factors when you retire. These include:

Plan to Have Adequate Health Insurance

Health insurance is an absolute necessity for retirees. This is not to say that it is not essential at a young age.  But as age increases and health issues increase, the importance of adequate health insurance is highlighted. This is essential, as by investing in a reliable health insurance plan, retirees are always prepared for any health-related emergency costs.

Ensure that Loans and Outstanding Assets are Paid for

This may sound easy but is very hard to implement. However, living with interest obligations, particularly without a regular income stream can be very challenging. If you have to spend a large proportion of your retirement income to pay off debt, there will be little enjoyment in retirement. It is advisable to finish your debt-based obligations and only retire once major loans are paid off.

Plan on How to Spend your Time

The busier a person remains during retirement, the fewer things they have to worry about. Plan about what you will do and design a schedule of weekly or monthly activities. Also, make a to-do list to help constructively spend your retirement time.

The more well planned your retirement, the better it will go. Invest in the best investment plans for retirement in Pakistan, plan on what you’ll do after retirement, and cultivate a strong social circle to keep you company for a fuller, happier retirement.

How to Make a Retirement Plan?

Retirement planning involves setting goals for your retirement and assessing the actions and decisions needed to achieve those goals. It includes settling on sources of income, forecasting expenses and cash flows, how to plan a savings and asset management plan.

For most people living in Pakistan, who do not plan for their retirement, retirement is a stage of life that is defined by:

• Limited income
• Difficulty in managing basic living expenses
• Reliance on children
• Healthcare issues with related expenses
• Living with hardships
• No enjoyment.

For retiring individuals that do not have adequate income for their retired life, living with support from family members can be difficult as well as humiliating.  In Pakistan, most private employees are not part of any retirement plan. Private employees have to depend on the next generation to support their old age. In addition, they can rely on rental income from property and interest on bank deposits.

In Pakistan, there is an option for some coverage through retirement benefit schemes that provide lump-sum amounts through provident and gratuity schemes.  However, the utility of lump-sum benefits is limited, as they pass on the responsibility of managing these funds to retirees. Pension schemes exist but are mainly for the public sector employees like government and multinationals.

Voluntary Pension Schemes

To facilitate employed and self-employed people to plan for their retirement in a regulated environment, the Securities and Exchange Commission of Pakistan (SECP) launched the Voluntary Pension System (VPS) in 2005. The Voluntary Pension System is regulated by SECP.

• Pakistani nationals above the age of 18 years with a valid Computerized National Identity Card (CNIC) or National Identity Card for Overseas Pakistanis (NICOP) are eligible to participate in VPS.

• Under the VPS, the employee, the employer (or both) can pay in funds to the employee’s pension account (IPA) which is invested for the long term. Contributions can be in a lump sum or at a regular frequency. There is no penalty for missing any payment.

• The pension fund manager issues an individual pension account (IPA) in the individual’s name, who is referred to as a “Participant”.  Each pension account (IPA) has a unique identification number (UIN). The funds that are saved up are used to payout a regular pension or lump sum on retirement.

• To protect account holders of these pension funds, the SECP has specified an investment and allocation policy for pension funds setting out the parameters for the investment of payments

• Individuals can distribute their contributions between equities, debt, money market instruments, and commodities. This distribution is by the investor preference and risk appetite.

How to Start Saving for Retirement?

Some key points to note are:

• Analyze income and expenses and make sure that you can save more than you earn.

• Make a budget that includes a specific percentage of savings and follow

• Make sure that you do not take out money from your retirement savings account for emergencies. Has money been set aside for emergencies like job loss, accidents, and medical expenses?

• Open an individual pension account (IPA) from any asset management company, or pension fund manager that you choose. This is the easiest way to start saving for your retirement. Contact information can be found at the following link: http://mufap.com.pk/members.php

• If your employer has a voluntary pension scheme, participate in it.

• Bear in mind that contributions to any voluntary pension scheme in a year are eligible for tax credits.

• Consult investment advisors to select investment products suited for your needs. The present age and expected age of retirement are important for developing an effective retirement strategy. The longer the period to retirement, the higher the level of risk you can tolerate in your portfolio. By investing in stocks, you become partial owners of the company and can participate in earnings as well as losses. Your longer time horizon will allow you to ride volatility in the market and balance your portfolio.

Building your Retirement Fund

You must keep your expectations about post-retirement expenses realistic. While income will decrease, expenses are going to increase over the long term. Most people claim that their annual spending will reduce to 70% of what they spent while working. Such an assumption is often unrealistic, especially if medical expenses are not included in the assumptions.

Always seek financial advice from a trusted financial adviser. Financial professionals can help you design a savings plan appropriate for your particular situation.

Make a habit of saving regularly and try to increase the amount you save each year, this increase should preferably be more than the rate of inflation.

Focus on the long term, do not be concerned about the short-term performance of the investment portfolio. Keep to a long-term plan and review your portfolio periodically to stay on track.

Use a broadly diversified portfolio of stocks and fixed income securities /bonds. The mix of the number of stocks versus fixed income securities /bonds depends, in part on your age, time to retirement, and your ability to tolerate market turbulence or risk.

In short, retiring early can be practical, provided that t is planned for efficiently and over the long term.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Early Retirement Planning in Pakistan: A Practical Guide appeared first on Smartchoice.pk.

However, this is now a myth. While saving is key for achieving both goals, making smart investments with your money is what makes them much more attainable in the world.

The fear that stops most of us from investing is a reasonable one, the process of investment is complicated and time-consuming. Many people face financial loss instead of financial gain, particularly in stock and commodity investments. 

When we work hard and discipline our lives to leave off spending and save, the thought of losing our hard-earned money makes us uncomfortable. As a result, most of us place our precious money away in a fixed deposit or saving certificate.

This is where the problem arises, the money we place into our safe and sure accounts is almost certain to lose value. The low-interest rates that these options offer are not even linked with inflation. This means that our money’s purchasing power falls as long as we are placing it there only.

Why you HAVE to invest

Saving and investing are two sides of the same coin. While looking to build wealth, saving is a key part of the financial process. BUT saving is important not because it produces wealth on its own, but because it creates the capital needed for investment. 

At the least, investing allows you to keep your savings on track with the cost-of-living increases that inflation causes. At the most, the main benefit of investment is the option of compounding interest or growth earned on growth.

How much to save

Given that we all enter the investor market because of unique needs, the best answer to how much to save is ‘as much as you can’. A baseline is to save 20%. As a guideline, saving 20% of your income is the lowest point to start from. In savings, more is always better, but the 20% baseline lets people build up a meaningful amount of capital throughout their work life.

The first step is to use these savings to set up an emergency fund to meet at least three to six months’ worth of living expenses. Once these emergency savings are set up, invest the funds that are not needed for specific short-term expenses. Once you make this a habit, and invested well, this will multiply your capital and help it multiply over the inflation rate. 

How investments work

To invest in any form of assets, like stocks, bonds, or other assets, you need to open an investment account. For stocks, this can be with a broker, through a brokerage account. Most people place their investment funds in their brokerage accounts and then use them to fund their trading accounts. 

Stocks are small units of ownership in a company. When a company goes from private to public, its stock is open for public trading in the stock market. A stock price is generally reflective of the value of the company, but the actual price is determined by what market participants are willing to pay or accept on any given day.

Stocks are seen as riskier investments than bonds because of their price volatility. If bad news floats about a company, people will want to pay less to buy shares, which will lower the stock price. If you bought the stock for a higher price, and the price falls, you risk losing that money.

In stocks, you make or lose money based on the purchase and sale price of what you buy. If you buy a stock at Rs. 10 and sell it at Rs. 15, you make Rs. 5. If you buy at Rs. 15 and sell at Rs.10, you lose Rs.5. 

Gains and losses are only booked or counted when you sell the asset, so the stock you bought at Rs.10 could drop to Rs.6 one day, but you only “lose” the Rs.4 if you sell the stock at Rs.6. At times, if you wait out the low-price period, and then sell the stock when it’s up to Rs. 12, you end up gaining Rs.2 per share.

How to Invest Reasonably?

Once you know how investing works, it’s time to think about where you want to put your money. In general, younger investors with years before retirement can afford to have riskier portfolios. 

A long time frame gives investors more years to face the fluctuations of the market and during their work life, investors are usually adding to their investment accounts and not taking money out.

If you have started investing late, and are near retirement, you are more exposed to the volatility of the market. This means that you opt for lower risk and volatility options like bonds and fixed return options. 

A higher-risk portfolio would ideally have a higher proportion of stocks and fewer (if any) bonds. As young investors grow older and need to reduce their risk profile, the investment in stocks should decline and investment in bonds rise.

One of the most important steps to take is to make saving automatic. Have your bank automatically transfer a portion of your paycheck into an account specifically for saving. This guarantees that you save constantly instead of making an active choice to set money aside.

This saving should stay in a low-risk option like a bank account and should remain in cash form.   This means that you have access to cash for emergencies whenever you need it. 

How to Build Up a Portfolio of Investments

The first step is to decide what percentage of your funds you want to place in riskier options like stocks and what percentage you want in safer assets like cash and bonds. This distribution will depend on your risk tolerance. Somebody young and working should invest in stocks entirely, while somebody near retirement age should have a larger allocation to bonds.

The primary purpose of investing is to grow your savings. Investors can achieve this growth through investments in stocks, bonds, and other less common options. Experts invest in commodities like oil, gold, and even crops and can earn huge gains.

In any investment form, you should make it your goal to have a diverse spread of investments.  In case you are just starting on your portfolio building journey, you have to make sure that you include options that include both stocks and bonds. Doing this will allow your portfolio to cover both high and low-risk investments.

For someone just starting to invest, take a look at mutual funds or ETFs (both are a collection of stocks, bonds, and other investment vehicles) instead of individual stocks. ETFs and mutual funds are safer options for building a diversified account.

Diversification (which means owning a set of different assets) is important because it reduces the risk of loss. Diversification means that there is a lower risk that your whole portfolio will lose value in a market decline. You will have to look for funds with solid track records and reasonable fees; plenty of popular press and dedicated research sites l will provide this information.

Depending on your financial strength and risk tolerance, you can consider investing in precious metals, commodities, and real estate, all of which are available for investment in the market. All these investments can be effective means to achieve portfolio diversification and manage risk.

A well-constructed portfolio should cover different types of assets (like stocks, bonds, etc.) that do not move in tandem. This reduces the volatility (and risk) of a portfolio without necessarily lowering its return (income) potential.

Save vs. Invest Checklist

The checklist below will help you understand if you need to save or are ready to invest:

1. Do you have a cash cushion that can cover three to six months of living expenses? If not, then start saving.
2. Do you have other short-term goals requiring quick access to cash (like travel plans)? If so, start saving.
3. Are you on track toward reaching your retirement goal by your desired age? If not, start investing.
4. Do you understand the risks involved in investing money for a long-term goal like retirement? You may not be able to access it until age 60  without taxes and a penalty. If so, you may want to start investing.
5. Do you feel comfortable with your current split of saving and investing every month? Where does it feel like you’re falling short?

Is It Better to Save Money or to Invest?

The answer to this depends on your risk tolerance, financial requirements, and when you need to access your money. Investing has the potential to generate much higher returns than savings accounts, but these higher returns come with risk, especially over shorter time frames.

If you are saving up for a short-term goal and will need to withdraw the funds in the near future, you’re probably better off parking the money in a savings account. If your goals are longer-term, you’ll generally find you can obtain more satisfactory results from investing.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Stop saving, start investing: How to make more money from your money? appeared first on Smartchoice.pk.

What is a stock?

Stocks are the basic units of a company. If you own a stock, that means that you have a little part of the company. Being an owner of the stock of a company means that you are a part-owner of the company and, therefore, should be getting some part of the company’s profits and income.

Stocks have a specific value, which is usually Rs. 10, Rs. 100, Rs. 500, or even Rs. 1000 per share. This is known as the face value of the stock. This value is technically what the company should always have available.

Most stocks are issued at a price either above or below their face value. The stock is then traded in the stock market. People who are looking to earn from selling or buying the stock are called traders.

If the company is selling the stock for the first time, the issuance is called an Initial Public Offering or an IPO. It is called a stock issuance if it’s done it before.

Companies usually sell their stocks, which are also known as shares, to raise funds for the company. These funds help the company to run its business and buy machinery, plants, and other assets that would allow it to do business better. The money that it gets from selling stock can also be used for debt servicing, expansion, etc. The details of why the company is issuing stock are usually disclosed to some extent. They are specified in detail, particularly if the stock issuance is being done for the first time.

What is the stock market?

Stock markets are just that, marketplaces. People and companies that have bought or want to buy shares come to stock exchanges to sell and buy shares. Since there are many shares to buy and sell and many buyers and sellers, this entire process has become digitized, and most stock transfers are done electronically. Stock markets are also known as Stock Exchanges (since shares and money are exchanged)

The buyers for a specific share help to push its price up or down. For instance, if many people want to buy Google shares, the price of Google will increase, as the people selling Google shares will sell to a person that is paying the highest price. Stock markets only allow the buying and selling of shares that are listed on the exchange, for example, a stock listed only on the Karachi Stock Exchange (KSE) cannot be traded on the Islamabad Stock Exchange (ISE).  People buy and sell stocks through specialized stock traders which are usually known as Stockbrokers or dealers

Stock markets can be of two kinds, the primary market, where companies issue their shares in an initial public offering (IPO) to raise funds for their operations. A general exchange is one where trades of already issued shares are made.

How Does the Pakistani Stock Market Work?

Pakistan’s Stock Markets work like most other markets globally. The stock market operates like an auction house or a trading floor in which buyers can bid on shares and buy at prices that they find attractive. If the price is too high, they pull away from the deal, and if there isn’t a good deal coming, the price is lowered. The buying price is called the bid, and the ask price is the one at which the seller wants to sell. Where the bid and ask prices are the same, a successful trade occurs.

This makes stock markets pretty much like traditional markets. The more a share is in demand, the pricier it would become. Similarly, if a share is not selling at a specific price, its price would continue to fall. This is the basic rule of demand and supply that determines market operations and ideally sets the prices of shares.

The stock market is different from other markets in the sense that it moves through the demand and supply cycle and price determination process at a very rapid pace. Such rapid changes in fluctuations of stock prices have led to most stock markets implementing ticks. Ticks are designed to keep price changes within specific ranges. This means that the price of a share cannot fall or rise beyond a specific minimum range.

Ticks serve to act as safety nets to protect investors from price crashes. Crashes occur when people start selling in a panic to limit their losses. This selling push begins to snowball, and a lot of people end up losing their money and investments.

How Does the Stock Market Affect An Average Investor?

The impact of the stock market performance and its rise and fall affects you, even if you aren’t an investor in shares and bonds. In rising stock markets, share prices tend to increase, and in falling markets, companies may need to cut jobs and try to reduce their overheads. This means fewer jobs and lower pay rates.

Falling stock prices and bond prices mean that pension funds are making lesser profits, and people lose money on their pension funds. The same applies to other saving funds and businesses as well. When stocks fall, there is less wealth to spread and spend.

Companies end up not getting enough money to spend on expansions and their operations. Retired people do not get as much pension from their funds as before, and overall, people end up having less to spend. This reduces income for smaller businesses and companies, and overall economic growth is affected. This reduces the spending for other consumer groups as well, and the slowdown of economic activity continues

A strong performing stock market is taken to symbolize economic well-being, and a dipped market over a long period causes an economic slowdown and sends out poor signals to investors.

Is Investing in the Stock Market Risky?

Placing your money anywhere, be it the stock market, the bank, under your mattress, or with your parents, is risky. There are different types and levels of risks involved, for instance, you or your parents can get robbed.

When you invest money in the stock market, the profit you will make is not fixed. The earnings will depend on the selling price of your investments on the day and hour in which you will sell them.

This means that you face the risk of the price being lower than what you bought and losing some of your hard-earned money. This means that as an investor in the stock market, you must follow the prices of your investments and make sure that they are progressing upwards. If they are falling steadily and there is negative news that seems to be continuing, you should think about cutting your losses and pulling out your money.

Another risk that affects the stocks and their investors directly is inflation. Rising prices and lowering demands means that the economy is losing its value as the actual buying power of the currency falls.

This makes investments lose their value as their actual buying power reduces. Investors in fixed return options like mutual funds end up getting less than their money’s worth. The best way to avoid risk is to follow the markets, and make sure to set your benchmark ranges in which you want to remove your investments so that you don’t lose too much of your investment.

How Can I Make Money in the Stock Market?

People earn money on the stock market in two ways. One way is through price appreciation.

You buy a stock for Rs. 50, and it goes on to rise to Rs. 75. If you purchased 100 shares at Rs. 50, this makes your investment worth Rs. 5,000. When you sell these 100 shares for Rs. 75, you earn Rs. 7,500. This means that you earned Rs. 2,500 from this transaction.

The example above gives you a profit rate of 50%. This is much above what any other means of investment would provide you. Even if the example is a little extreme in terms of the gains made, many investors do make such profits through a serious focus on market trends and share prices. This method requires continued monitoring of the stock market and related developments to follow price trends.

The second way to earn money is through dividend earnings. In this method, you invest money in shares, which you know will pay good returns to their shareholders. Dividends are a part of a company’s income that it pays to its shareholders.

This method involves identifying and investing in companies that have records of paying good dividends and then accumulating a portfolio of such shares. A portfolio is a group of shares that you own. It is commonly called an investment portfolio.

 This method of earning from the stock market is a long-term method and usually involves less trading. This is more of a hold and earn approach and is generally adopted for the long term. When a publicly listed company pays dividends to its shareholders, that adds value (and income) for the shareholder.

When stocks increase in price and are trading at more than what the shareholder paid, that’s a positive outcome.

How can I make money in the stock market?

As a beginner to the stock market, it is always advisable to remember that the markets will always trend upwards. However, this does not at all mean that the shares in the market will also move upwards; many will fall and die off. The stock markets are notorious for their unpredictability and volatility. Seasoned traders and experts also lose on their investments despite all their technical skills.

So for a new investor, it is best if you go for index funds. Index funds are funds that select some stocks from a specific stock market, and they follow these stocks. Some index funds issue dividends as well. The advantage of such index funds is that they will follow the stock market in its rise upwards and help you to increase your investments as well. But this strategy is going to be effective in the long run.

Avoid the dream of making a few hundred thousand in a few months. Invest in middle-market stocks if you can otherwise opt for funds and shares that are known for paying out good dividends.  This means that you look for companies with good profitability and sound leadership.

Don’t go for market darlings and overhyped companies. Follow the price-to-earnings ratio (P/E). P/E is a formula that gives the value of a stock. It has its shortcomings but would give you an idea of a share’s worth. You can also follow the growth in earnings of a company to gauge its attractiveness.

How do I get started investing?

The younger you are when you start, the more you will make from your investments.  There are some necessary steps to take, which are more like habits to form and stick to. Set an amount that you can set aside for investment for a month and stick to it.

Figure what your goals are and what you want to do with your investment income. Travel the world? (short term goal), set up a college fund for your kids? (Long term goal), do you want to buy a house? (medium to long-term goal). Having your financial priorities sorted will help you identify what sort of returns and time frame you have for your investments.

Figure out what works for you.  Do you want to track share prices and follow market trends rigorously? Or do you want to be a passive investor and get returns over the long run, without moving your investments around too much?

If the first option suits you, then you want to be an active investor.  These are investors that do active trading and ride trending share prices and try to get the maximum return out of the stock market fluctuations.

If the second option suits you, then you are set to become a passive investor. In such investments, the majority of holdings are in index funds and mutual funds. These funds help to mitigate the risks and cut down the stock market volatility.

The key to both strategies is to avoid placing your investments in limited sectors of the economy and spread them into diverse sectors to ensure that at a time, any one of your investments would be doing well.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post How Pakistan Stock Market Works? Understand the Basics appeared first on Smartchoice.pk.

Saving is something that we all need to do. To develop a regular habit of saving, it is usually helpful to have a structure for your spending. This is where financial management and budgeting have a role to play. And yes, these terms apply to all of us, not just companies and businesses.

Personal Finance Management

When money comes into play, most people feel that it’s just about numbers and how much they make in a period. This approach is both simplistic and ignores a basic point, how you think about money is very important.

There are several steps you can take to get set for some long-term wealth building. Ignore how large (or small) your paycheck is and focus on making your savings account larger. Make this a conscious thought process. Takes steps to develop a healthy mindset aligned toward personal finances.

Managing your personal finances is just a way of listing down where your money goes, and it helps to identify areas where you may be spending money or where you can reduce spending. Do you have money troubles by the end of the month? Or have to cancel plans because of a cash shortage? Or end up with less cash than you anticipated? Or do you need a sizable amount of money in the next year?

This makes you a prime candidate for budgeting and financial management. Both are just methods used to keep track of your money and watch where it is going. Budgeting lets you get a grip on your finances and helps manage your earnings better.

Going through a financial management exercise on your spending is about seeing how much money you earn, where you spend it, and assessing if you are doing it right or reworking your expenditures to match your goals.

This is where financial management apps help to make informed financial decisions. We list the most useful apps available on Android and Apple play stores.

1.   Hysab Kytab

The only app that is developed in Pakistan. Hysab Kytab is a money-saving app that lets users set financial goals, develop a budget, offer review charts, and track expenses. The best thing about Hysab Kytab is the simplified visuals of spending that it offers users. These visuals are simple to understand, and users can easily see where their money is going. It also helps show where users went off track.

2.   Wallet

The Wallet is a financial management app that supports multiple currencies. The app is good to use as it highlights high or risky financial decisions. It also links with banking apps to track minor spending and charges. The more advanced features require a subscription, but most features are free to use.

3.   Pocket Guard

Pocket Guard is another money management app that links with mobile banking apps and tracks purchases, payables, and bills. It also offers comparative budgeting month to month helps to track previous expenses. The app also offers estimates about how and what you should spend and shows what spending will push you out of budget.

4.   Home Budget With Sync

Suppose you manage household expenses with your spouse or other family members. In that case, Home Budget with Sync is an app that allows multiple users to manage household finances by keeping track of their purchases. This way, the user can review their spending to make the right changes to save money.

The home budget has a family sharing feature that coordinates purchases and expenses of the whole household. This makes it easier for a multiple member household to follow the household budget. It also shares where and what spending heads need to be cut down to meet the budget. This app helps multiple users follow a set budget and manage group funds as the users decide. The app offers individual budget options to let people manage their private funds in the same app.

5.   Honeydue

Honeydue is another budget app that is good for multiple users. It is marketed as an app for couples to manage their finances jointly,but it can be used by housemates and family as well. It allows the tracking of all financial details like bank accounts, credit cards, loans, investments and savings. People can limit which information they wish to share with their partners.

The app helps users track their monthly expenses and savings and can be designed to send an alert when bills are due or if an expense head is going over budget.

It also offers a chat option to discuss issues with other people using the app.

Almost every money management app offers the option of tracking incomes and expenses, some version of spending analysis of the past period and suggestions on how to manage better for future ones

Instead of finding an app that will give you the best result, the first step for financial management and awareness is to download any app and start using it.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Best Personal Finance Management Apps in 2022 for Pakistanis appeared first on Smartchoice.pk.

More experienced investors invest in commodities like foreign currency, gold, and crypto. All investment options can give good gains but have risks associated with the investment. To avoid risks in any form of investment, you should make it your goal to have a diverse spread of investments.

In case you are just starting on your portfolio building journey, you have to make sure that you pick options that include both low risk (fixed deposit certificates) and high risk (shares). Doing this will allow your portfolio to cover both high and low-risk investments.

Risks in Investment

However, not everyone is skilled enough to invest in any of these options without incurring some losses. Many people just do not have the time or strong enough nerves to invest in any asset directly.

If you are such a person or have already faced losses in your investment and don’t want to risk-reducing your savings further, you can opt for the low-risk options available. These fund options will help reduce your risk and offer a comparatively stable investment growth over time. The two most common investment options in funds are mutual funds and exchange-traded funds (ETFs). We will discuss ETFs in detail.

What is an ETF?

An Exchange Traded Fund (ETF) is an investment product offered by Asset Management Companies (AMC). It consists of a mix of securities that follows an index (which is called its Benchmark Index). ETFs are available to investors on Stock Exchanges through stockbrokers (TREC Holders). They can be traded like stocks with real time pricing during trading hours on an Exchange. Therefore, they share the characteristics of both open-ended mutual funds and stocks.

Internationally, the demand for ETFs is growing because of the convenience they offer and the lack of financial acumen (and time) on part of the investors to make successful stock picks. Similarly, retail investors are also wary of paying hefty fees to financial advisors and traditional mutual funds which leads them to invest in ETFs.

If you want to invest in equity or fixed income securities and find it challenging to pick sectors, identify securities, conduct research, track dividends/coupons, and capital gains, then the ETF does it all for you. An ETF aims to track its specified benchmark index while providing real time price of the fund throughout the trading time.

An ETF can have tens of stocks across various industries or it could be isolated to one particular industry. For example, a banking-focused ETF would contain various stocks from the banking industry. An ETF can also track an existing index like the KSE – 30 indexes etc.

How to Invest in an ETF?

Investors can buy and sell ETFs in the stock market through a stockbroker of the Stock Exchange. A new investor will need to open trading (brokerage) account with any of the PSX TREC Holders or brokerage firms.

An existing investor in the stock market can buy and sell ETF units through their existing trading (brokerage) account with any of the PSX TREC Holders.

ETFs can be bought with a very small amount. In the odd lot market, even one ETF unit can be bought or sold, whereas in the regular market, the ETFs can be traded in a lot size of 500 units.

ETFs Explained

An exchange-traded fund (ETF) is a mutual fund that invests in securities linked to a particular index. Investing in an ETF offers exposure to a group of stocks. Instead of dealing with individual stocks, you can get multiple shares through a single ETF investment.

The stocks in an ETF are selected based on its investment criteria. ETFs can have different investments like stocks, commodities, bonds, or a mix of these types. Again, these are pre-specified, and you won’t be shocked, provided you read their investment documents thoroughly.

ETFs differ from mutual funds because they can get registered on stock markets and are bought and sold there like ordinary stock. ETFs can be traded through both online brokers and the usual broker-dealers.

Assets Under Management:

For an ETF or a mutual fund, assets under management (AUM) are the current trading prices of all the investments it handles on behalf of investors. It is a factor like the capitalization of a company. AUM shows the fund’s size, and generally, higher AUMs mean higher trading volumes and imply better liquidity. The AUM is used to calculate management fees and other charges.

Benefits of Investing in ETFs

ETFs have lower operating costs than traditional open-ended funds, and they offer flexible trading (unlike mutual funds) and have greater transparency as they are mandated to disclose all their holdings.

An ETF is a simple and efficient way to invest in the stock market without going into the hassle of investing and researching individual stocks. By investing in an ETF, your investment is instantly diversified across all the underlying securities in the basket.

ETFs provide an easy way to diversify across different stocks, commodities, bonds, or other securities in the markets where many ETFs across multiple asset classes exist.

ETFs can yield two types of returns:

 Capital Gains:
Investors can trade ETFs like a stock by buying them at a low price and selling it at a high price to realize the profit/gain.

Dividends:

The fund manager receives dividends from the securities that comprise the ETF basket. The dividends may be distributed to ETF unit holders after the deduction of management fees etc. The dividend distribution policy of the ETFs is described in their Prospectus or Offering Document.

Individual stocks and ETFs trade alongside each other on the Stock Exchange. But there are two major differences:

• ETFs are generally much more diversified as they are comprised of a basket of stocks.
• Most ETFs track specific indices, while stocks do not.

Better is a relative term; investing in ETFs is generally better from the diversification perspective.

Why it is Smart to Invest in an ETF

ETFs are generally passive instruments formed to track an index. ETFs provide real-time pricing. This means that investors can see their prices change throughout the trading day like those of shares. ETFs are bought and sold at market price through a brokerage account and offer intraday trading liquidity. The price of ETF can be above (premium) or below (discount) the respective NAV. Investors also have the benefit of having Indicative NAV available at specified times during the trading hours to help them make trading decisions.

Comparatively, a mutual fund isn’t priced until the trading day is over. When encashing, you buy the mutual fund units directly from the mutual fund at its respective Net Asset Value (NAV). Investment in mutual funds can be subject to front-end or back-end load/sales charges, while investors in ETFs only have to bear brokerage charges.

Being a passive investment option, ETFs are great for long-term investments. This is subject to your investment objectives, considering factors like risk and return goals. Most ETFs track an underlying index, and as the index updates, so should the ETF.

Investing in ETFs also saves the investor time and money. Investors do not have to do the research and make security-specific investment decisions themselves. The costs for the ETF are also generally lower than those of any mutual fund units purchased.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post How to Start with ETF Investment in Pakistan appeared first on Smartchoice.pk.

This makes it even more important to have easy-to-apply tips to make sure that there is some money left over by the time the month end is near. Having some money left over from their salary by the end of the month means that there would be some savings done successfully.

The average Pakistani job holder earns anything between PKR 25 to 50 thousand per month. This amount is sufficient for those starting off in their jobs and is single. But for a couple of those living away from their home station, the income can prove to be insufficient, particularly if they are bearing rent expenses.

Regardless of their demographic details and living situation, the common need is to manage the salary in a way that the last ten days of the month are bearable and there is money in their pocket for any emergency.

The following basic level tips should help to keep your spending within control and a predefined budget.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Budgeting Tips for Lower Income Families in Pakistan appeared first on Smartchoice.pk.