Is investing in mutual funds halal?


#1

Yes it is halal, as long as the following are meant:

  1. Mutual funds of companies or constituents of the funds do not breach the principles of Shariah. Investments related to unethical or moral behaviors are Forbidden in Islam. There are several prohibited industries in Islamic finance.

Those are:-

  • Financial services that feature transactions based on gambling, speculation and/or interest. Examples would include conventional banks, investment companies, insurance companies, and other financial institutions.
  • Certain food and beverages industries, most scholars agree that investing in tobacco, illegal drugs, alcohol, and other non-halal foods/beverages are prohibited.
  • Gambling; this means Islamic funds can not invest in online lotteries, casinos, lotto draws and betting transactions.
  • Some sectors in the Entertainment industry; those sharia prohibitions apply to adult entertainment products including videos, audio recordings, websites, magazines, etc. The same goes for certain types of non-Islamic music and cinema products.
  • Cloning; this decision is a fairly recent one. Islamic scholars must continually make decisions about the compliance state of new technologies and industries.
  1. It is important for investors to look into the financial screening of the corporations before investing in their stocks/funds. It is not permissible to participate or trade in shares of corporations whose primary activity is permissible but they make deposits or borrow on the basis of interest. The fundamental rule is that of the prohibition of acquiring shares of and transactions (investment and trading) in the shares of corporations that sometimes undertake transactions in Riba and other prohibited but from things even when their primary activity is permissible.

  2. A direct statement should be stated by the mutual fund manager himself that declares that the bonds are managed in a Halal Shariah Compliant way. And as an investor, you should check with the Shariah committee bored to ensure that. May mutual funds claim they are doing halal but they do not have any shariah recognitions

Sources: dummies.com and iefpedia Shariah Standard