Despite the risk factors, individuals, entrepreneurs, and even large business groups can achieve their financial goals by investing in stocks. “With careful evaluation of the market and other factors, potentially high returns can be gained from the stock market,” said Yasir Masood, Director and Chief Operating Officer at Cherat Cement Company Limited, a subsidiary of Faruque Group of Companies. Talking to WealthPK, he said while making an investment, prioritising safety was important for individuals, large business groups and small and medium enterprises. “Due to low-risk and fixed income streams, banks are considered the secure option to deposit funds for saving purposes. However, it is crucial to probe deeper into the dynamics of the stock market, where opportunities and risks abound. Investments in safe sectors, including banking, tend to shine when the stock market faces a downturn. However, it is due to the inherent resilience of the stock market that often serves as an anchor in times of market turbulence.” Masood said monitoring factors like market evaluation and performance metrics can offer significant growth potential for investors. “For instance, X company can have ripple effects on related entities like Y company. When Y company performs well, not only does its share boost, but it also influences the performance of associated companies. The market evaluation of company stocks goes beyond nominal market value.

It encompasses a holistic view of the company’s growth performance, revenue growth, market share, profitability and strategic initiatives. Understanding the interconnectedness of companies within an industry is key to making investment decisions. Investors can often consider additional incentives such as payouts, cash dividends and bonuses. These factors contribute to the overall value proposition of investing in specific stocks and it may influence the investor sentiment and market dynamics.” Discussing the importance of investing in stocks for fund generation and savings, Hamza Anwaar, Assistant Manager Equities at Zahid Lateef Khan Securities, told WealthPK: “To keep the economic cycle active, both individuals and companies must invest in some other sectors apart from their regular business. “If savings are kept in banks or in the form of hard cash at homes, eventually inflation devalues it. So, money should be converted to an asset, including real estate, national savings, bonds, gold, currencies, etc. Compared to all these classes, the KSE-100 Index has outperformed the other assets in returns combined with the dividend and capital gains. The records of the last twenty years prove it. So, investing in stocks can be considered as one of the best options.” He said that the price-to-earnings ratio in the Pakistani stock market was at the lowest rate as compared to international markets. He said there was now a good opportunity for investors to invest in the stock market as it had come out of the crisis period of the last five years.

He said it was a good opportunity for small and medium enterprises to invest a part of their funds in the stock market, which had currently low market capitalisation. Stressing the need for investment in stocks to generate funds, Faiza Farooq, manager of finance at an Islamabad-based company, said investing in stocks could offer several benefits over bank savings. “Stocks provide higher average returns compared to banks. So, investing in well-performing stocks can potentially grow wealth significantly overtime.” She said investing in a company’s stocks gave shareholders partial ownership of the firm with certain rights – voting rights on the company’s decisions and the potential to benefit from its growth and profitability through stock price appreciation and dividends. “Stocks are generally more liquid than other types of investments like real estate or certain types of loans. Stocks can be easily bought and sold on the stock market.” She said depending on the investment strategy, investing in stocks might offer certain tax advantages – capital gains from the sale of stocks held for more than a year may be taxed at lower rates than ordinary income. “The suitability of stocks versus bank investments is based on individual financial goals, risk tolerance and investment time. So, consulting a financial adviser is necessary to adopt the most appropriate investment strategy.”

Credit: Independent News Pakistan (INP)