Investment in Mutual Funds according to shariah law
The mutual funds which allocate their assets in securities as per the shariah law are known as Shariah mutual funds.
The Shariah Law mentions some restrictions with regard to businesses that an individual pursues. Some of these restrictions are as follows:
High Risk: One of the principles of Islamic law is to avoid gambling. Gambling as per Islamic law is considered a sin. Going by this logic, individuals following the Islamic law are restricted from entering into any business that has high risk as that is equivalent to gambling.
Ban on payment of Interest: Taking a loan against interest is considered unlawful. It is deemed morally unjust and unfair to pay interest. This is one of the primary reasons that business tends to rely on partnerships and ownerships. They tend to share profits (and losses) rather than borrowing or lending.
Restricted Businesses: One of the most important aspects with regards to investments as per Shariah law is the restriction from investing in certain types of businesses. Businesses such as gambling, alcohol, tobacco, drugs are considered immoral.
What is the minimum investment in a Shariah-compliant Mutual Fund?
In the case of a lumpsum investment, the minimum investment is Rs. 500. However, in the case of SIPs one may start with an investment of only Rs. 100, payable periodically.
