Pakistani investors face hard choices in 2026
It will be for the first time that Pakistan will float a 30-year dollar-denominated Eurobond but the decision to sell it will depend on the interest rates that investors will seek. PHOTO: FILE
The year 2025 has been remarkable for many investors in Pakistan. The subcontinent's long-standing love affair with gold once again translated into wealth creation for middle- and upper-income households.
Gold continues to serve multiple purposes: a store of value, a hedge against uncertainty, a wedding necessity, jewellery for daily wear, and for some, a convenient physical asset that avoids documentation, taxation and price discovery complexities.
A relatively smaller but smarter group also benefited from the rally in silver, driven by its historical catch-up potential and rising global industrial demand. Meanwhile, equity investors in Pakistan witnessed an extraordinary run, with the Pakistan Stock Exchange (PSX) delivering nearly 50% returns in 2025, following returns of 84% and 55% in the preceding two years.
As investors look ahead, the key question is: what asset classes are available and relevant for 2026?
Current accounts
If you are holding money in a current account, whether due to religious considerations or simple inertia, your first financial step should be to move it elsewhere. A current account yields a 0% return, while banks deploy this money into government securities earning 10-11% annually. In simple terms, you are offering an interest-free loan to the bank. A small shift can make a meaningful difference.
Savings accounts
Savings account holders are marginally more financially aware, but returns remain limited. Savings rates are typically the SBP policy rate minus 1.5%, translating to roughly 9% per annum today. Recent fiscal measures also mean higher taxation as savings income increases, reducing post-tax returns further.
Low-risk fixed-income mutual funds
More financially savvy investors often opt for low-risk mutual funds offered by reputable asset management companies. These funds provide liquidity, daily returns, professional management, and typically outperform savings accounts slightly by investing in government securities and term deposits, though returns are net of management fees.
Investor Portfolio Securities (IPS) accounts
For investors seeking to eliminate intermediaries, an IPS account is a powerful option. Enabled digitally by the State Bank of Pakistan, IPS allows individuals to invest directly in government securities, earning 10-11% returns while paying only a nominal fee. This cuts out the bank's spread and improves net yields.
Balanced mutual funds
Investors dissatisfied with fixed returns, especially during falling interest rate cycles, may consider balanced funds. These allow 30-70% exposure to equities, offering higher long-term growth potential at the cost of short-term volatility. Such funds suit investors with moderate risk tolerance and a medium-to-long investment horizon.
Pension funds
For salaried individuals facing high taxation, pension funds remain one of the most underutilised tools. Contributions offer tax credits, long-term compounding, and disciplined retirement savings. The tax savings alone can be redirected towards improving lifestyle or reinvested for greater wealth accumulation.
Gold and silver
Precious metals do not rise indefinitely. Gold's 2012 peak in USD terms took nearly eight years to revisit. However, given rising global debt, monetary debasement and persistent geopolitical tensions, gold and silver remain compelling long-term hedges rather than short-term trading instruments.
Crypto assets
Pakistan's improving global engagement, particularly with the US, has revived discussions around crypto adoption. The government is working towards a regulatory framework that could allow citizens to invest in high-risk cryptocurrencies and stablecoins through regulated, user-friendly platforms. While volatility remains extreme, digital assets may emerge as an alternative store of value for a new generation of investors.
Real estate
Property investment has underperformed in recent years due to higher taxation, increased documentation, elevated interest rates, and official valuations moving closer to market prices. That said, for individuals seeking housing or rental income, real estate remains relevant. Mortgage-linked tax credits, especially for properties under 2,000 sq ft (flats) or 2,500 sq ft (houses), enhance long-term viability. Don't leave free taxes on the table.
Direct equity investments
Despite the PSX's sharp re-rating from 3x P/E to around 8x, opportunities still exist in dividend-yielding and growth-oriented stocks. Investors can focus on sectors they understand, such as IT, banking, oil & gas, fertilisers, cement and steel, and adopt a monthly investment strategy through digitally enabled brokerage platforms, benefiting from dividends and long-term capital appreciation.
Wherever you choose to invest, remember that this is your hard-earned money – built through time, effort and discipline. Financial literacy should be embedded in schools, universities and workplaces to empower individuals to make informed decisions.
This is not investment advice. Thorough research and prudent risk assessment are essential. Higher risk may offer higher long-term returns, but diversification remains key. Avoid putting all your eggs in one basket. Align your investments with your income, expenses, financial goals and risk tolerance.
No financial avenues are better than investing in your health, family, faith, education and self-projection. Invest in your passion to convert it into an entrepreneurship stint while you can take risks. As we enter 2026, let us pledge to be financially smarter.
THE WRITER IS AN INDEPENDENT ECONOMIC ANALYST