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.