Where to invest your PKR in 2023

Government Securities & Money Market Funds

Spending five minutes reading it may make you a lot more money with less risk, then by just being passive and having your funds stuck in a bank that gives out little to no profits.

Scheming Banks & Lazy Regulator

We all know the inflation story, and we also know that commercial banks being scammy have started to either forcefully convert savings accounts to current accounts, or are forcefully converting accounts to Islamic accounts.  As they convert to Islamic accounts, they do not have to pay any profit, or a very low profit on the same.  The banks don't care, and the regulator could not care less either. 

Since its your capital, and your savings, you have to safeguard it for yourself.

Historically High Interest Rates

Interest Rates currently prevailing in Pakistan are at their highest level. They are currently in the range of 20-22%, and it is possible for an ordinary investor, to benefit from the same as well.  The rates are expected to stay elevated for the next few months, or at least for all of 2023 – there is literally no reason not to benefit from high rates, which are also risk-free.  I'm saying risk-free, because this is the interest rate that the government is paying on whatever it is borrowing.  Government borrowing is generally deemed as risk-free.  If you think that it isn't, then that's a separate sovereign risk discussion beyond the scope of this piece.

What is our objective here?

The primary objective here is to invest in *government securities*, or mutual funds that invest in government securities.  We want to keep our risk super-low, but also want the ability to exit an investment whenever we want, while also getting a profit that is much higher than being offered by banks, or any other asset classes at this point in time.

How do we invest?

There are two options here:

Direct investment in Treasury Bills issued by GoP

You need to open an Investor Portfolio Services (IPS) account with either a bank or the Central Depository Corporation (CDC).  Since banks are scammy, we stick with CDC.  Call up CDC, or email them.  They will send you a form, fill it up, sign it, and send it back via email.  Your account will be open in about 2-3 days.  Once account is open, you can invest in securities issued by the GoP through the same. 

On every auction date – this is basically the day in which the government borrows from the market, you transfer funds to CDC and ask them to buy treasury bills for you.  They will buy it for you at whatever the market rate exists (slightly more complicated than this).  Boom – you're invested and not paying any cost for the same, other than minor service charges.

Invest in Money Market Mutual Funds

Mutual Funds are investment vehicles.  They take money from investors, and invest it in different investments.  They are fully regulated by SECP, and follow proper processes, etc.  Aligning with our earlier objective, we are just going to look at something called a Money Market Fund.  Whatever we did through investment in Treasury bills above, we do the same with Money Market Fund, but with less operational issues, and better access to capital.

You need to open an account with an Asset Management Company – there are many out there. Some of them include National Investment Trust, MCB Arif Habib, Faysal Funds, HBL Investment, Lakson Investments, among others.

Call them up, open an account – the sales representative there may get sleazy and try to sell random stuff that does not align with your risk profile.  DO NOT invest in anything you don’t understand at this stage. Also, DO NOT pay a front-end load – this is a fee that should not be paid for low risk money market, or fixed income funds.  We do not trust institutions who are sleazy.  Once the account is open, then invest in any money market fund listed here.  The MUFAP website has the worst UX in the history of websites – its just terrible.

Once you invest in a money market fund, your capital will grow on a daily basis.  Yes, daily basis.  You got profit for three days, take it out.  One day, take it out.  There is no penalty on withdrawing funds early, etc. – and you still get a 19-20%+ on an annualized basis.

What if I want Shariah Compliant investment avenues?

Same process as above.  If you are investing directly, stick with Sukuk, or Ijara, or any other Islamic instrument issued by GoP.  CDC will be able to advise you accordingly.  If you are investing via mutual funds, just go for a Islamic Money Market Fund.  All of this is Shariah compliant.  The returns are slightly lower, and you should be able to get something like 18-19% on an annualized basis

What does Ammar do?

I personally invest most of my funds in a money market fund right now, specifically via iSave (MCB) – which one can download from your app store. It's pretty convenient to move funds in and out, and you get a 19-20% annualized return on a daily basis through one of the money market funds.  There are other apps available as well, including Meezan, Faysal Funds, and others. You should definitely explore the same.

What do we do next?

For the foreseeable future, just keep your funds in either Treasury bills, or money market mutual funds.  Once things stabilize, we can then move funds to other riskier assets – but for now strictly stick with a money market fund, or invest directly in treasury bills.

Disclosure: All information here is presented solely for the benefit of the good people out there. There are no endorsements, affiliations, or advertisements, etc. The sole purpose here is to assist people in making better, and more informed financial decisions, earn a higher market competitive return, and avoid paying high fees to institutions that do not care for people.