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A guide to investing for financial freedom for the average

middle-class Pakistani

This book’s intention is to offer a simple and easy-to-follow yet credible guide for
middle class Pakistanis to invest their money, so they can stop living paycheck to
paycheck and achieve financial freedom. The purpose of this book is not to provide a
get rich quick guide nor is its purpose to act as a plan which would 100% guarantee
achievement of financial freedom and wealth for the reader. Its purpose is to
demystify the world of investing to a certain extent for the average middle-class
Pakistani who is not very financially literate. The purpose of this book is to allow you
to understand different investment strategies, how they are executed, what are the
risks attached to them, what are the possible rewards attached to them, and how they
compare with traditional methods of investing. It’s also supposed to highlight the
need for investing and how inflation makes investing highly critical to a person’s
financial health. This book was created as an MYP personal project by Hasan Ahmad,
an MYP student from Grade 10, TNS Beaconhouse.
Table of Contents

1. The need to invest 4

2. Traditional methods of investing and their benefits & drawbacks 5

3. How to save effectively

4. Investing in the stock market

5. Investing in real estate

6. Investing in foreign currency

7. Investing in a financial institution

8. Investing in a corporation

9. Investing in the government

10. The feasibility of investing and magic of compound interest

The need to invest
It is critical for a middle-class Pakistani to invest their money as soon as possible. The
first thing investing saves you from is inflation.
Inflation is the amount, expressed in percentage, by which a currency’s purchasing
power decreases. For example, if one rupee can buy one mango in 2017, and 10
percent inflation occurs between 2017 and 2018, one rupee can buy only 90% of a
mango in 2018. While an extra ten rupees for mangoes over a year’s time may not
seem too much of a difference, when inflation is analyzed over a long period, it is
realized that inflation greatly devalues a currency over 10 years or more. The
projected rate of inflation for 2018 is 6.5%. If this inflation rate continues for the
next ten years, then 100,000 Pakistani rupees of today’s money would amount to only
35,000 rupees of 2028 money. Even if you save your money and lead the most frugal
of lifestyles, if you do not put that money to work and if you do not invest it, that
money will eventually become worthless.
Another is the sheer price of property and other assets in Pakistan. It is estimated that
building a one canal house in Lahore would cost PKR 14,652,000 while an average
middle-class citizen makes 50,000 rupees. Without even accounting for rising real
estate prices and inflation, it would take someone saving a very generous 50% of their
income per month 48.84 years to have enough money to build a house. If people
invest their money, they can very easily grow their fortunes and be able to make the
shift from middle-class to upper-middle class.
Another reason one must invest is the emerging nature of Pakistan’s economy. With
a non-industrialized economy, Pakistan is likely to experience market growth higher
than most developed nations of the world. The Karachi Stock Exchange was the
best-performing stock exchange in South Asia for 4 years and since 2013, it has
consistently outperformed the Standard & Poor’s 500, a stock market index used to
track the performance of the 500 largest public corporations listed in the United
States of America. This potential makes Pakistan particularly attractive for investment
as while industrialized nations like USA, Germany, UK, or Japan may experience
lower economic growth of a few percentage points, Pakistan is due to see higher
growth and it is therefore an advantage to invest in an emerging economy like
Finally, investing over a long period has practically no downfall. Recessions will
always happen, inflation will always fluctuate and no matter how effective monetary
or fiscal policy is, economic crises will occur but over a 30- or 40-year period, these
factors will not affect your investment. The value of your investment may fluctuate
but it will almost always increase in overall value from start to finish.
Traditional methods of investing and their benefits and
A common platform through which people of all social classes normally invest their
money is called “committees”. In this system, a group of people contribute a fixed
amount of money and every month or so, one person’s name is announced (usually
through a lottery-style system) and that person receives all the money. This person
then must return the money after a certain amount of time, interest free, and the next
person gets the money. This cycle keeps going on.
This system is quite attractive to someone who is in need of a large sum of money to
start/fund a business, buy a car or make a time-sensitive purchase and is an enviable
alternative to receiving loans from banks who charge high interest rates and take large
collaterals if one defaults on/misses a payment. The method is also far more relaxed
with payments than a bank would be, allowing for late and unscheduled payment
without seeing much of a protest from the members participating in it.
However, the committee system has no shortage of drawbacks. The clause that one
person receives a lump sum and must not pay it back until the next committee creates
a difficulty