I have been living in USA for
the last 19 years and work as electrical
engineer for a semi-governement orgnization. I am planning to move back to
Pakistan and would like know where and how should I invest my money so
that I could get at least 20% return. I have noticed that some well known
companies and mutual funds such as ICP give out dividends in the 20-30%
range. I would like to diversify and keep about 40% in cash in US dollars.
I do not want to earn interest, and would prefer dividends and profits
instead. I have a 12 year old son who will be going to school in Pakistan
Mohammad Fahar Usmani
USA 3rd Sept. 2002
Dear Mr. Usmani, even though you and I may not want to take interest, bank
interest rate is a very good benchmark to judge any investment by.
Here is how you can use it, for the sake of simplicity consider bank rate as
a "Risk Free" rate, now look at any investment that is offered to you,
lower the risk of an investment the close it is to bank deposit (in terms of
riskiness) and hence the return should also be closer to the bank rate
This simple rule also works the other way around, the higher the return that
you are getting the riskier the investment is. This rule is an ABSOLUTE, do
not let anyone tell you otherwise.
Which leads to the question that you have asked.... ICP dividends of 20-30%.
ICP seems conservative, then how can it pay 20-30% dividends? Very
simple....in Pakistan and many other parts of the world dividends are
In the US declared dividends are divided by the Market price of the stock or
mutual fund. Therefore a $1 dividend paid by a company, results in a yield
of 1%, if the company stock is trading at $100. But in Pakistan if a
company pays a Rs10 dividend that Rs10 is divided by the Par value (IPO
price, generally Rs 10) resulting in a 100% dividend!
Inflation rate in Pakistan is pretty high, therefore it always made sense to
keep your money in $ and when the $ returns were converted into Pak rupee
there was enough to pay your bills. However since 9/11 Pakistani rupee has
appreciated significantly and now State bank is in the enviable position of
trying to maintain the $1=Rs60 level.
Going back to Pakistan is a book in itself, but financially I can tell you
that should you have your house and car (preferably a diesel) paid for and
not live too extravagantly, you should be able to get by on $1,000 per month
very easily. Just be careful and remember the golden rule that I mentioned
above, it will steer you away from many odd ball investments.
Back to Investment Help Center
Back to FAQs