What are the options available to invest in PSX?

There are several investment options available for investors. Let’s discuss some of them:

1. Stocks: At the Pakistan stock exchange investors can invest in reliable, liquid, and efficient stocks by buying or selling shares/common stocks of listed companies. Stocks relatively provide a higher return as compared to other investments for eg government bonds.

2. Real estate investment trust (REIT): Real estate investment trust is a scheme that focuses on investment in properties and real estate and derives its income from such investments for its investors. Types of REITs available in Pakistan are rental, developmental, and hybrid (which is a combination of developmental and income REIT). This also counts under the equity scheme.

3. Bonds: PSX mostly offers corporate bonds. If well-settled companies decide to take up a loan or debt from the public market rather than turning towards banks with heavy conditions, they can raise money through corporate bonds. They are also called fixed-income securities. Not only a company, but government can also raise funds through fixed income securities. Last year, a government-owned company raised money on Pakistan Stock Exchange through a competitive process. This was the first time a government-owned company listed itself on the stock exchange. The competitive process here means asset managers like financial institutions and mutual funds could also invest in government. Not only them but retail individual investors were also given the opportunity to invest in a government-owned company

What are mutual funds?


Mutual funds are the amalgamation of several stocks. Money is pooled from different investors who have a common investment objective. The collected investment is then invested in different securities like equities, bonds, etc. In other words, an asset management company manages funds on behalf of its investors. The combination of securities is called a portfolio. The gains or capital appreciation earned from these investments is shared in whichever proportion of funds are owned by investors after accounting for expenses like Net asset value (NAV). Any fund’s net asset value depicts its price per unit:
NAV= (Current market value of all the Assets-Liabilities)/Total number of units outstanding
Mutual Funds Association of Pakistan (MUFAP) is a trade body that manages multi billion rupees asset management industry in Pakistan. A wide variety of assets are managed including stocks, bonds, money market instruments, government securities, etc. The main bit part of this body is to ensure transparency, monitor ethical code of conduct, and work on the growth of mutual fund investing in Pakistan.
One prime benefit of investing in mutual funds is it gives early/individual investors easy access to the stock market as all the financial analysis is already done by professional experts on diversified portfolios which is readily available for investors. Another advantage of investing in mutual funds is that it reduces the risk of concentration by investing in diversified portfolios. It is because of diversification the ups and downs on different securities have a lesser effect on fund performance hence gains. This ensures the stability of investment and reduces chances of loss. Moreover, through mutual funds, you can buy/sell or move funds easily which means investors have the advantage of liquidity.
In addition, one of the biggest benefits of investing in mutual funds is the tax benefit. The Government of Pakistan has given this incentive to investors especially salaried investors. Investors can claim tax rebates by investing in mutual funds and reducing their tax liability to the government. Also, investments held by investors for a time duration of 48 months, or more are likely to qualify for exemption from capital gain tax.