Where to Invest Money in Pakistan – 5 Ways to Start with 5000 PKR

Are you wondering where to invest money in Pakistan?

In today’s economy, where inflation soars and incomes dwindle, the quest for sound investment options has never been more critical. If you survey those around you, you’ll likely hear recommendations for real estate, plots of land, or gold. However, these options can be impractical for many and often fail to deliver substantial returns.

That’s why we’ve compiled a list of investment opportunities that require minimal starting capital—some as low as 5000—and promise significantly higher returns on investment (ROI).

Let’s dive into these exciting prospects!

Where to invest money in Pakistan – 5 ways to start right now

Following are some of the most promising ventures where you can invest money in Pakistan:

1. Real Estate Investment Trust

Let us explain before you confuse this one with some plot or builder. Real Estate Investment Trust or REIT is a company where many investors pool their money (with as low as 5000). The company then uses this money to buy real estate projects. Any return that is generated is distributed among the individuals according to proportion.

Dolmen City REIT by Arif Habib is one such example. It is the REIT of Dolmen Mall, located in Clifton, Karachi. People who have invested in this REIT use their money to finance and rent out shops in the Dolmen Mall. The collected rent is then distributed among the investors according to the percentage they invested.

Most importantly, REIT offers much higher profits than conventional Real Estate. Let’s look into it:

2 Crore house in Karachi is typically rented out for 30,000 per month.

Yearly rent=30,000 × 12 = 360,000

Rental Yield = (360,000/20,000,000) × 100 = 1.8%

However, Dolmen City REIT currently has a rental yield (dividend yield) of 10%.

Keeping the investment amount the same for a fair comparison, if you invest 2 Crore in the REIT, you will get the following results:

 Rent Collected = 20,000,000 × (10/100) = 2,000,000 per year or 166,666 per month

For the same invested amount (2 Crores), you will get 166,666 PKR per month with REIT instead of 30,000 per month with conventional Real Estate.

This 2 Crore was only an example; you can start with REIT with as low as 5000 PKR.

REIT offers the following benefits:

• You don’t have to deal with any hassle of Real Estate like managing or maintaining the property. The REIT will handle everything.
• You don’t need to run after the client to collect rent. With REIT, the profit is credited to your Bank Account without any requirement from you.
• To typically invest in any Real Estate, you would need b at least. But with REIT, you can start with only a few thousand just as we discussed above.
• You get much higher ROI with REIT as illustrated in the example above.

A REIT (Real Estate Investment Trust) is traded as units on the stock exchange, and to purchase it, you will need an account with the Pakistan Stock Exchange.

Opening a brokerage account is quite straightforward now; the process is completed online and typically takes only two days to set up your account and make it fully functional. We will make a guide on it shortly.

2. Money Market Fund (Mutual Funds Segment)

Money Market is yet another venture where you can invest money in Pakistan. What makes it even more special is that it is impossible to lose your capital in it so it is a good option for retirees or people with low-risk appetite. Both conventional and Shariah-compliant solutions are available.

The way a Money Market Fund works is that you open a mutual fund account and deposit your money in the money market segment which is pooled by other individuals too.

The mutual fund-house takes all the money and then lends it to the government to run its operational expenses or projects. Whatever return is received is distributed back to the individuals proportionally.

A Money Market Fund offers the following benefits:

• Grow your money at least at the rate of inflation. If you keep your money in a bank account, you’ll typically lose purchasing power due to inflation. However, a money market fund can help you match the inflation’s effects.
• It keeps your capital protected. It is impossible to lose money in the Money Market Fund because of very short durations of the venture.
• The Money Market Funds in Pakistan have given an average of 9% CAGR return over decades, which is very near to inflation number.

If you want to invest in the Money Market Fund, you will need to open a mutual fund account. We have created a detailed guide on how you can open a mutual funds account online within 10 minutes. Be sure to check it out.

Also, you should know that the Market Money Fund has been giving a very good return (20% per year) for the last 2 years due to high interest rates in the country but as the interest rates have been falling recently, the return of Money Market Fund will not remain as high.

3. Index Fund (Mutual Funds Segment)

If you are serious about increasing your wealth but still in a safe manner, then the index fund is another venture where you can invest money in Pakistan.

Due to a number of benefits. Index funds are also endorsed by some of the most legendary investors like Warren Buffet.

First of all, you should know what an index is. Index is a group of top public listed companies of a country by market capitalization. When you invest in an index, your investment is distributed among the top-performing companies in the country.

And let’s suppose one of the companies suddenly stops performing, then it will fall out of the index and will be replaced by the next best performer. This means that your money is always going to be invested in the best public listed companies.

Let’s take a look at what an index investing has to offer:

• The main benefit of an index fund is that its fee is quite low all over the globe. However, in Pakistan, the expense of an index fund is comparatively high but still quite low as compared to an equity fund.
• With index funds, you can invest and forget about your investment. Your money will be automatically invested in the top companies of the country by index replication. And when the index gets rebalanced, your investment will be automatically adjusted.
• The Index of the top 100 companies on the Pakistan Stock Exchange has given a 16-17% CAGR return in the last 25 years, which beats inflation, gold, and real estate.

If you are looking for a Shariah-compliant option for index investment, Al Meezan has a KMI-30 index mutual fund, in which your money will be invested in the top 30 Shariah-compliant companies.

To start index investing, you will need to open a mutual fund account. Follow our guide for assistance.

4. Dividend Paying Stocks

You must have heard that the stock market is a very volatile place and should be avoided at all costs. Not at all, it is actually the wealth creation platform where you can invest in the top businesses of Pakistan and become a shareholder in their profits.

And if you want to play safer, then dividend stocks are for you. For dividends, it is a profit cut shared by the company to its shareholders after every quarter, six months, or annually, according to the company policy.

Companies that pay a major portion of their profit in dividends are the most stable businesses in Pakistan, like the Fertilizer sector. Their share price doesn’t get too low in a bad market condition, but on the flip side, it won’t go as high either in a booming economy. But you will keep getting stable dividends in your bank account year after year.

Here are a few benefits of dividend-paying stocks:

• You will keep getting dividends in good and bad market conditions.
• These companies are the mature businesses of Pakistan running for decades, it is almost impossible for them to go bankrupt and shut down.
• The share price will remain stable and flattish mostly. During an economic slowdown, dividend stocks don’t go down much if any, but on the flip side, don’t expect them to skyrocket in an economic boom.
• You can reinvest your dividends in buying the shares of the same company. It means that you will get a bigger dividend next time. If you keep doing it, the snowball effect will lead to very large dividends in the future.

To buy shares of dividend-paying stocks, you will need a brokerage account in the stock market. You can open the account online within only 2 days by signing up and filling out the form on the broker’s website.

5. Exchange Traded Funds

Exchange-traded funds (ETFs) are yet another venture where you can invest money in Pakistan.

They have been very popular in the Western world since the 1990s due to their low fees and flexibility but it is only recently that Pakistan has seen the introduction of ETFs.

Exchange-traded funds are just like mutual funds where your money is invested into a basket of securities, the only exception is that they have much lower fees than mutual funds and can be traded at any time during the market open hours.

It is another way of investing in the index but with more flexibility and benefits. The first method has already been in the Index Fund point above.

Let’s dive a bit deeper into it. ETF is a basket of companies like Meezan Pakistan ETF (MZNPETF) has the top 12 Shariah Compliant companies.

If you purchase a unit of this basket, your money will be distributed in these 12 companies just like mutual funds. The difference is you can buy or sell this basket during the stock market open hours, unlike mutual funds where you get the unit at the day’s end NAV (net asset value).

Buying and selling an ETF requires more work than a mutual fund as you will need a stock brokerage account and place the orders manually. While in the mutual fund, you only put the money in it and the rest is handled by the fund manager. It is a trade-off that you do at the cost of expense ratio. You can make your pick accordingly.

Let’s look at the benefits of an ETF:

• Low expense ratio as compared to mutual fund’s index fund. The expense ratio is a fund house fee and matters a lot when you are a long-term investor as it compounds over time with your overall return.
• Flexibility when buying and selling the units. You can purchase and sell ETF units at your desired price in the market but that is not the case with mutual funds. When you invest or redeem in a mutual fund, you will do so at the day’s end’s price.

There are 8 ETFs in Pakistan currently at the time of writing with only 2 Shariah-compliant options. Those two are Meezan Pakistan ETF, which is a basket of the top 12 Shariah-compliant companies and the second one is Mahaana Islamic Index ETF, which is a basket of the top 30 Shariah-compliant companies.

Conclusion

There you go with the list of ventures where you can invest money in Pakistan. The list could be quite long but we only chose the most practical ones that can be pursued by anyone of any age with any amount.

All the options we discussed above can be started with an investment as low as 5000 and give a much better ROI than Real Estate and Gold in the long run.

You can explore them in accordance with your risk appetite and objectives. If you have any queries regarding these, let us know in the comments below.