Over 50% of Pakistanis store cash at home

[Imran Khan]

There must be other things you can invest in no, besides just parking funds in your Savings account or Term deposit?

Mutual Funds? Stock?

Government paper? Debt funds? Bonds?

Small savings schemes (government guaranteed)?

Provident fund? Pension schemes?

real estate is only best way as i know

 

[CSPK]

big fishes never pay taxes so govt. recovers as much from those who are already tax payers. recent withholding tax on transactions is plain stupidity, i have also started to avoid unnecessary bank transactions and prefer to keep some cash at home.

moreover its good to invest in other areas such as property, rather than putting your money in banks and hoping it would grow.

 

[Zibago]

Simple when govt taxes your saving people stopped using banks for saving

 

[Finer]

That is why the government is forced to borrow the loans with higher interest rates. This is main issue. People need to contribute to the society in the digital age of the world or else, they are no different than corrupts, looters,...etc.

 

[Sully3]

Maybe that's why everybody has a gun in Pakistan.

pathetic troll comment from a pathetic poster.

mods should ban this imbecile

 

[Mugwop]

This is money that is not circulating within the economy and helping Pakistan grow. What can be the reason for this: tax evasion or distrust of financial institutions?

Distrust

I'd like to add never carry 20PKR with 5000PKR

 

[Thəorətic Muslim]

whats wrong if we keep money in homes ?

Money Multiplier.

Basically a person puts money into his/her bank account. The Bank looks at how much they are required to keep in reserve and allocate the rest for loans/investment to give to whoever asks for them. (Insert bank earning interest, sharing it with person). The theory is the more money there is available the less the interest rate(s), hence the ability for economic growth.

There must be other things you can invest in no, besides just parking funds in your Savings account or Term deposit?

Are we talking about Norway or Pakistan?

 

[padamchen]

Are we talking about Norway or Pakistan?

I was giving examples from India.

I am a middle class guy. Buying a house to me at least was a massive pain that went on and stretched over two years. I do not want to do that again and again. Besides real estate as well as Gold have slumped badly anyways.

Equity is what one can do. Mutual Funds either directly or through a wealth manager (usually CFAs). Across different AMCs and cap classes. Give you a good spread in terms of your asset allocation. Very tax friendly with no tax if held for over a year, and 15% short term gains if under a year. Give returns ranging from 12-15% all the way up to 35-40%.

Then you have Debt funds (Income, credit opportunities, long, short, ultra short, liquid, gilt, etc.). Can save a bit of Tax at source here by opting for Dividend Distribution Tax so that the proceeds are tax free in your hands (a net gain of about 4+%). Returns range from about 7% for the money market to about 11-12% for the long term papers. With some potential for spikes if interest rates fall. Need to be held for three years to avoid short term gains, after which you pay 20% after Indexation.

Arbitrage opportunities are also there. Which are as liquid and almost as safe, with slightly higher returns, and are treated as Equity. So tax friendly.

There is some talk of Modi GEE having another brain fart though on Equity taxation. His previous ones being Demonetisation, increasing surcharge on income tax over 75 Lacs and I Cr, reducing the rate of PPF and other small saving schemes, and sending UT hounds after the only 4% of the salaried middle class that astually pays tax.

Options in direct stocks are there of course. Either directly through a broker, or through PMS (portfolio managers). However these have minimum ticket sizes ranging from 25 Lacs to 1-3 Cr, and take close to or above 3% a year in flat fees and profit sharing over a hurdle rate. The good ones have CAGRs over as long as 13-14 years that range from 30-50% after expenses. Have exit fees for withdrawal before 1-3 years usually as that is the minimum length of time they need to deploy the money. 3-5 years being the investment window.

Finally you have the ultra conservative and ultra safe universe of government guaranteed but low return small savings offered by post offices and most nationalised and a couple of big private banks as well (less hassle). PPF (the only triple EEE investment and national favourite), Sukanya scheme for girls under 10 years (like PPF, but 8.4 instead of 7.9%), 5 year National Savings Certificate (8%) and the reintroduced 9+ year Kisan Vikas Patra (7.6%), of which the NSC is more tax friendly with only the last year's interest effectively taxed, term and recurring deposits, and the quarterly Senior Citizen's Savings Scheme (8.4%) and Monthly Income Plan (7.something%) for retired folk. These benefit Crore of Indians. Any government touching them would be dragged through the streets worse than if they spoke to you on Kashmir. Just to give you an idea.

Finally the EPF and Super Annuation as well as the newer NPS retirement schemes for salaried people per labor laws where the employer contributes half and employee half. The salaried guy's nest egg for retirement. Along with usually some LIC insurance plans which most people have in their portfolio which offer insurance as well as a pretty large corpus at retirement (returns in the low single digits though).

The super rich of course invest in angel funding, private equity, rare wines, and art (booming market). I'm not there yet, though I might invest in solitaire diamonds which have been doing great over the past 5 years.

Not Norway. Your next door neighbour.

 

[Jugger]

This is same as what Indians used to do before demonetisation. Pakistanis are not similar to Indians in this respect too.
We simple don't trust the banks with our money.