Islamic Mutual Fund - Kickoffall Info Hub

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Tuesday, April 7, 2020

Islamic Mutual Fund

A mutual fund is a financial intermediary that permits a group of investors to pool money with a predetermined investment objective.  The fund manager of Mutual Fund is responsible for investing the pooled money into specific securities (usually stocks or bonds) and making more profits.  An investor of a mutual fund buys portions of the mutual fund and becomes a shareholder of the fund. 
Islamic Mutual Funds also works similar to the conventional mutual funds; but the fund manager has to be strictly adhered to Sharia principles and should not invest in any interest-bearing stocks.
Advantages of Mutual Funds
  • Increased diversification among many securities that decrease risk.
  • Professional investment management
  • Ability to join in investments that may be accessible only to bigger investors.
  • Service and convenience
  • Regulation of the governmental body.
  • Transparency and easy to compare
  • Lower cost to buy a stock or a bond which lower than investing individually.
  • Flexibility

The conditions of the Islamic Mutual Funds
  • The main business of the company must be lawful (halal).
  • It must be clear that the business/project in which you invest has no any kind mingling with the interest-bearing activities.
  • The company whose shares one intends to purchase must have some illiquid assets in its possession.

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