Jagoinvestor

July 18, 2018

What are Shariah compliant mutual funds? – An Ethical investment

Have you ever heard about Shariah-compliant mutual funds?

We get a lot of Muslim leads who want to invest in mutual funds and a lot of them mention that they would like to invest in mutual funds which are shariah compliant.

So lets look at the subject!

Shariah investment

Examples of Shariah-based Mutual Funds

Shariah-based mutual funds are just like other mutual funds which are structured according to the shariah rules. The restrictions or prohibitions mentioned above are considered to screen and select the funds and ensure that they are Shariah-compliant.

There are three funds in India which are shariah compliant –

1. Goldman Sachs CNX Nifty Shariah BeES Fund

2. Taurus Ethical Fund

3. Tata Ethical Fund


Let us look at some of the restrictions as per Shariah law.

1. Prohibition of interest

Payment of interest on your investment is considered as unjust or morally unfair. It prohibits the interest paid on all the loans.

Islamic finances rely on sharing the ownership of assets instead of borrowing or lending and thus along with the ownership of the business (buying shares of that business), it tends to share the profit as well as losses of the company also.

2. Restricted businesses

One of the important segments of this investment is that the companies which are involved in the business activities which are prohibited as per the shariah law cannot be part of shariah investment. It includes the businesses of Alcohol, drugs, gambling, and other immoral trades.

3. High risk

The main motive of Islamic investment is to avoid excessive risk because Islam forbids gambling. And this is the reason why derivatives are ruled out of it.

FAQ’s related to Shariah Mutual Funds

Q1. Who can invest in Shariah Mutual funds or Shariah investment?

Though this fund is based on Shariah Islamic law, it is not restricted for any investor. Which means anyone including individuals, NRI’s, HUF, companies or any other institute can invest in Shariah Mutual fund.

Q2. Is there any tax benefit on this investment in Shariah mutual funds?

Till now there is no tax benefit on the investment of Shariah Mutual funds.

Q3. Can an investor from other religion invest in Shariah ethical Fund?

Yes, any investor can invest in Shariah Mutual Funds irrespective of their religion.

Q4. What is the minimum amount for these funds?

You can start this investment with minimum of Rs.500. If you want to start your investments, we can help you. Just share your details with us and our team will call you

So this is all about Shariah investment, I hope you have got answers to all your queries. Still, if you have any doubts please share your query in the comment section.

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23 Comments
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Sarah Taylor
5 years ago

Tata Ethical Fund is an open-ended equity fund which invests in a diversified equity portfolio based on the principles of Shariah. The investment objective of the scheme is to provide medium to long-term capital gains by investing in Shariah-compliant equity and equity-related instruments of well-researched value and growth-oriented companies.

Currency Crypto
5 years ago

Thanks for sharing good info with us

sudeep kumar
5 years ago

Very very nice article sir
I’m quite pleased with your every news
Thanks for sharing this news
Love you sir
Thanks a lot for it

Seema Sharma
5 years ago

superb content, effective blog very helpful also…
thanks for sharing with us, keep posting.

Sivasubramanian
Sivasubramanian
5 years ago

Dear sir,
1) Am a NRI, want to invest in SIP . What’s the procedure to start it by online.
2) And I have a ICICI Pru life time classic insurance policy on my spouse name. While opening the account they enquired through phone about the payment path like regular or direct . She replied that regular, at that time she doesn’t know about some commission will be collected by bank. This policy was taken on October 2017 . Is it possible to change from regular to direct plan. If yes, what’s the procedure.
Expecting your reply. And will be appreciated.

PraMod
5 years ago

Nice Article Good information Thanks for sharing this information

Leena H
Leena H
5 years ago

Interesting ! Thanks for sharing.

Shameem
Shameem
5 years ago

Nice article.. will help more people to join the equity markets.

Tanveer Hussain
Tanveer Hussain
5 years ago

Very nice explanation Thanks for your this efforts rt…Informing the right way to travellers is big “ punya” that you are doing by making awareness in financial path.

Dreams Digital
5 years ago

excellent, it will help to think and grow

Dreams Digital
5 years ago

Like always, great content, Keep up the good work!, Seem’s Interesting

Vishnumoorthy Bhat
Vishnumoorthy Bhat
5 years ago

Never knew this information. Thanks for artical.