Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh.  (May Allah's Peace, Mercy and Blessings be upon all of you)

One of our brothers/sisters has asked this question:

Assalam alaikum,

I am a working professional in Mumbai, India and as such am obliged to pay Income Tax. However, there are some means to save this high amount of taxation. One of these is investing in Mutual Funds. And my question is regarding this issue. I would like to know if it is halal to invest in mutual funds. I have read that in the US, they have Islamic Mutual Funds which are governed by Shariah law and hence permissible. However, there is no such provision in India and since mutual funds do not guarantee any fixed returns, can moslems invest in them?

Kindly help me out and guide me towards the correct path.

Jazak Allah

(There may be some grammatical and spelling errors in the above statement. The forum does not change anything from questions, comments and statements received from our readers for circulation in confidentiality.)

Answer:

Invest in mutual funds

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is none worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.

Your Question: I would like to know if it is halal to invest in mutual funds

Beloved brother, provided the stocks of the companies which are held by the ‘mutual-fund’ do not indulge in dealing in what has been specifically declared as ‘haraam’ and unlawful by Allah and His Messenger (saws) (like alcohol, interest, gambling, prostitution, etc.); then obviously there is absolutely no harm if a believer wishes to invest in such ‘mutual funds’.

But if the companies whose stocks are held by a ‘mutual-fund’ deal or transact their business in a commodity which is unlawful in Shariah, then it would be unlawful and haraam for a believer to invest in such ‘mutual-funds’, regardless of his reasons!

If one amongst the ‘mutual-funds’ do not guarantee a fixed return, that by itself would not make it lawful for the believers to invest in it; for if the primary commodity of the companies whose stocks are held by the ‘mutual-fund’ conduct their business in a ‘haraam’ or unlawful product, regardless of whether it offers fixed returns or not….to invest in such a ‘mutual-fund’ would be unlawful for the believers who sincerely fear Allah and the Last Day.

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me alone. Allah Alone Knows Best and He is the Only Source of Strength.

Your brother and well wisher in Islam,

Burhan