Stock market beats inflation over decades through compound returns

The inflation trap nobody talks about

Muzamil opens with a poll that reveals the scale of the gap. Ninety-three percent of Instagram followers said they want to invest, yet most have never seen their money in action. Laeeq starts with a concrete example that reframes how listeners should think about their savings. “If you have 10,000 rupees in 2000,” he explains, “normally the goods you have purchased in your daily life for 10,000 rupees, in 2020 you need 44,000 rupees to basically buy the same things.”

This is the inflation story. Your rupee devalues because the economy is growing but the currency is shrinking in purchasing power. Holding cash is not a safe choice. It is a losing bet. Muzamil asks what people should do with that knowledge, and Laeeq lays out the first principle: “this is not financial advice, this is learning and experiences.”

Why diversification beats picking winners

Laeeq introduces a framework that runs through the entire conversation. Assume you invested 100,000 rupees in 2000, split into four equal buckets. Twenty-five thousand in US dollars is worth 80,000 today. Twenty-five thousand in gold is worth 400,000. Twenty-five thousand in government bonds is worth 187,000. Twenty-five thousand in stocks is worth 887,000.

Combined, that 100,000 grows to 1.5 million. You get the compounding power of stocks without betting everything on equities. Laeeq learned this the hard way. When he invested directly in stocks without understanding macro-economic headwinds, the Pakistani rupee devaluation hit his oil company holdings. “PSO imports oil,” he says. “When PSO imports, they will pay more money. When they sell it, they are coming in the expense of you in the dollar, so that will impact your EPS.” He booked losses until he realized the market was giving him real information about the country’s economic direction.

Sharia-compliant options for new investors

One question keeps coming up in Muzamil’s audience: is the stock market even allowed. Laeeq cuts through the confusion. Pakistan Stock Exchange has a Sharia-compliant index (KMI) managed by Misan Bank. If you do not want to research individual companies, there is an even simpler path: ETFs. “ETF is a bucket of companies,” he explains. The Mizan ETF holds 25% cement, 10% fertilizer, 15% fertilizer again (agricultural exposure), 10% oil and gas marketing, 10% oil and gas exploration. These are big companies with low risk. They pay roughly 9 to 10 percent dividend yield per year.

The advantage over mutual funds is simple: you own them directly on the stock exchange, you can sell instantly without a three-to-four-day cash-out window, and mutual funds charge you management fees that ETFs do not. “If you don’t want to get into the complexity of the stock market,” Laeeq says, “rather go with a bucket which is already giving you the same sort of return.”

The restaurant that taught him to invest

Laeeq left his data consulting job to start a business. He had a good Provident fund return from ten years of work. Instead of leaving that money in the bank, he put it all into a restaurant with three friends in a prime location. They expected 50 to 60,000 rupees of income per person each month. The first month they did 1.2 million in sales. Then economic indicators worsened. “Your dollar is appreciated, your economy will be below,” he says. People stopped coming. He closed the restaurant and booked 90% of his cash as loss.

“It’s so difficult to earn your money,” Laeeq reflects. “It’s not that easy. We need to be smart. We need to invest that money in a place where they work. You are working very hard to earn the money, but the money itself is basically working hard to earn back that amount of money.” After that loss, he decided to study investing properly. The platform Sarmaya.PK came out of the lessons he learned.

Compound returns on dividend-paying stocks

Muzamil asks for a real example. Laeeq walks through a thousand shares of PPL purchased in 2010 at 170 rupees. The initial investment was 170,000 rupees. By 2020, the stock had fallen to 93 rupees, so on paper it was a 77,000 rupee loss. But Laeeq never sold. PPL paid bonuses (issuing extra shares) and dividends (paying cash) every year. In 2010 alone, a 20% bonus gave him 1,200 shares and a 90% dividend gave him 10,800 rupees in cash. By 2013, the bonus and dividend compounding had grown his shares to 1,980. By 2020, with all dividends reinvested, he held 2,732 shares with 157,000 rupees in cumulative cash, trading at roughly 253,000 rupees in market value. Total return: 3 million rupees. Annualized, that is 30% per year.

“These are the assets you can liquid,” Laeeq emphasizes. “You have to sell one thousand shares, in a minute it could be possible.” The lock-in is entirely in your mind.

Getting started without perfect knowledge

Laeeq built Sarmaya.PK to lower the barrier. New investors can open a demo account, track a mock portfolio without spending real money, and see live returns alongside company fundamentals. The goal is learning before committing. “There is a learning cost,” he says. “Maybe you will book some losses, maybe you will book some other things. Come with the money which you can basically afford.”

Muzamil’s takeaway is practical: “If you think that you want to invest… do try to look into investments and share this episode with them.” Laeeq’s closing thought carries the entire conversation forward: “It’s always good to start investing 20 years ago, but the second best time when you need to invest is right now.”