i have always had a mixed view about investing in mutual funds, but till now have not done it, due to halal/haram debate.
In my reserach for the topic, i coudnt find any concrete evidence saying it is halal or haram.
What is the advice of investing a large amount i.e approx. 4 mil in mutual funds. Is it recommended or not ? (from sharia perspective as well as investment perspective)
Regarding Halal/Haram, I consider it halal because it is not a fixed profit secondly there have been multiple times where the investment was in minus so both profit and loss is possible.
Usually mutual funds invest in equity (stocks), commodities, money market and debt. When you are creating your portfolio, ask your fund manager to put 0 % in debt. Profit on debt is based on interest so in my opinion it cannot be considered halal. Rest portfolio based on Equity, commodities and money market is perfectly fine.
Regarding profits, in the long run i.e. ~5 years and provided country’s stock market does not crash, you can earn around 20% of what you invested (speaking for UBL mutual fund). For short term gains, i am guessing the profit would be lesser.
Is it recommended or not? Let me advise you something. Don’t put all your eggs in one basket.
Having said that, if these 4 millions is all what you got then i suggest to invest maximum 1-1.5million in mutual funds and invest the rest amount in alternate options.
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thankyou for the inputs, i see meezan offers meezan daily income fund category, recommended to me, with asset allocations in :
cash / placements with NBFC and modarabs / placements with banks and DFIs / commercial papers / sukoks
as it is sharia compliant so they say there is no debt in any of these, and the interest if any, is given as charity (as per their meezan islamic commity guidance)
What would u say about this. Are the above legitimate, or just different terms for convential methods (i.e debt etc)
I used to be the biggest proponent of Meezan Mutual Fund. For one, it is shariah compliant as per their method of investment and certified by some renowned Muftis (there is a dearth of Islamic scholars in finance, so we have to rely on whatever few are there), and second, it is hassle free.
But now I’ve changed my mind after seeing how these Mutual funds are ripping off investors with heavy fees and govt taxes that leaves only crumbs for investors. The fund managers also play satta in stock market and multiply their own wealth instead of looking after your and my money.
Instead, I am more inclined to long-term investment in shariah-compliant stocks that give sustainable dividend (from 10% to 20%). If, for example, a company gives 15% dividend per annum then after 15% tax, it leaves you with 12.75% income without any doubts about halal/haram and no blood-sucking leeches (fund managers) attached.
Note: I am not recommending “stock trading” (buying/selling) which is a risky business and you may end up losing your capital. Long term investment has fewer side effects that someone with little or no knowledge of the market can still invest and make steady income. It is perfect way to hedge your rupees against devaluation and inflation.
i think the main challenge in this is finding sharia compliant stocks, especially those which give around 18 percent return per annum.
And as per my reserach, i coudnt find many that gave steady dividents, but more spordaically
Would really like to know some of these tested stocks which u have bought and received some good returns.
@saudkhante that’s very easy. Check this link:
Also this one, scroll down to Market Watch and select KMIALLSHR in Index filter.
PSX conducts assessment of companies and declares their shares as shariah compliant based on certain parameters. This compliance keeps changing from time to time, so the list of PSX website is the latest. SCSTRADE might be slightly outdated for this status, but other fundamentals are up to date.
Caution: Dividend yield should not be taken on face value, one must look at other fundamentals, company’s strength and their payout history. To my assessment, EFERT, PICT, ISL, POL and SNGP are good shares to keep, both for dividend and capital gain.
The mast important factor while investing in mutual funds is the timings. Don’t invest when the market is booming. Invest when the market is down. These days KSE100 is in the bracket of 44,000 to 45,000 points. I would recommend you invest in mutual funds of Meezan when KSE100 goes below 40,000.
I know Meezan guys invest in KMI30. But KMI30 follows the pattern of Kse100.
@ToofanKhan bhai, KSE100 is not going to come down to below 40K. If the on-going political tug of war settles in favour of opposition, then you should expect it to go way above 50K.
will be sure to check the provided links out, thanks
i think this holds weight for equity funds and short term investment, for long term and money market / income funds, the trends for past 7 years are relatively stable as per the reports meezan provided
As for KSE100 and KMI30, i think KSI100 sharia compliance is provided by govt of Pakistan.
And for KMI30, sharia compliance is provided by meezan banks own sharia committee.
This begs the question, who is to be trusted in providing proper or atleast some effort in checking sharia compliance… govt of Pak or meezan bank?
Yes some companies dividends are very attractive but please share how one should decide which company’s stock shall one buy for long term investment.
@isloo1: Brother, this is interesting discussion. Is there any forum where we can discuss all forms of investment like we discuss only real estate here?
@ToofanKhan bhai, I am an amature in this domain, I think Humayyun and Imtiaz are pro, they should be able to guide us about such forum.
Sir here i am posting one of my very old article that was also published in Investors’ Longue as well. Reading this will clear your concept about shariah compliant or such matter.
For mutual funds i am not an advocate of investing with them when you can do it at your own & earn good income. because most of the times They have stupid strategies. Such as in 2018 i met with Al meezan investment senior analyst on a jogging track, & they were aggressively investing in the stocks that we stopped to invest anymore due to political instability & other factors. But their compulsion was they got the funds during that period so they had to invest aggressively.
https://www.facebook.com/humayyun786/photos/a.1667188946854677/1855759951330908/
thankyou for the inputs humayyun sahb.
Investing in companies directly seems the way to go forward …
Would you suggest some basic key pointers, which would help deciding in choosing which stocks to invest in ? and are there any consolodated platforms or forum, one can look into for this?
And would you recommend to go for long term stocks, or short term? which one will have more capital appreciation
Sir this is a complete science that you can not learn in a comment.
But there are few simple methods for non-professionals. Tell me your objective for the investment? & the tenure, so that i may advice accordingly.
the objective is,
period : 1-3 years
goal : primary is capital preservation, with good periodic returns (quaterly, annually) / secondary is capital appreciation
The same question from my side with some modifications:
Period: Long-term (5+ years).
High dividend yield.
Low risk in terms of company not paying dividend in future.
Stable price with some moderate price gain (min 5% per annum).
What fundamental indicators to look at?
What is the best time to purchase?