Investing in the future is something that we all plan to do…at some point. Some of us aim to secure our future through savings, because we want to retire and fulfill dreams and desires of a certain lifestyle and, just like our parents, we wish for our golden years to be, well, golden. On the one hand, we save to spoil ourselves a bit and indulge in our wish lists while, on the other hand, we save to provide safety nets for our futures – enabling us to afford unknown, unexpected expenses that may arise out of the blue.
Apart from these two reasons, specific long- and short-term goals are also often identified and saved for. A study of consumers across eight markets in Asia, including Pakistan, revealed that homeownership and education are top savings priorities for most individuals. Hence, to fulfill these priorities, it is essential for such people to make their finances grow.
Unfortunately, in Pakistan, many individuals save, but keep their cash at home – depriving themselves of return on investment, or growth of their money. According to a recent study, around 50% of savers in Pakistan use an informal approach to save, resulting in no financial growth with the passage of time – which means their money will stand a victim to inflation and their purchasing power will inevitably go down. The main reasons cited for keeping cash at home are immediate access to savings, lack of investing experience, and unwarranted fear of risk – specifically while not actually knowing risks involved in investing. The study also revealed that 38% of active savers use basic products such as fixed term deposits and savings accounts to meet financial goals.
If you’re a middle- to upper-class Pakistani, you can benefit a lot more by saving and investing your excess or liquid cash in more advanced options. The report added that consumers in Asia could boost their savings by an average of 42% if they move from a basic savings approach to a low-risk wealth management strategy, which includes mutual funds.
Mutual funds offer investors the guidance they require on how and where to invest, since there are experts at the helm investigating future prospects of various businesses prior to investing in them on the mutual fund’s behalf – which basically means, on your behalf. A whole lot easier than investing directly into markets yourself – where you’d have to have specific and sound knowledge of stocks, sectors, fluctuating rates, risk factors, and the list goes on!
Simply stated, investing in mutual funds provides you with an opportunity to earn more even if you have limited money to invest, while also providing instant diversification into various capital markets, and allows you to be a part of a pool of investments with other investors who have similar savings objectives as you. When compared to other savings and investment options, this diversification provides relatively more reliable returns for you as an investor.
Also, if you are saving for your future and have a long-term horizon in mind, it is feasible to consider some exposure to what are known as riskier investment options, so your money grows substantially over time. Many individuals are keen to invest in mutual funds, as they inherently address a variety of risk profiles in line with specific financial goals.
Money doesn’t grow on trees, and definitely not stashed under a mattress. It can only grow when you save and invest wisely. Emerging affluent consumers who are earning enough today must secure their financial futures by investing in the right places now! Your future self will thank you!