QUESTION:
As Salaamu Alaikum,
Is it permissible to invest in mutual funds (for example in Unit Trust Corporation) whereby the investor does not utilize the dividends, but instead cashes in on the increased share value price over the initial investment?
ANSWER:
Wa Alaikum As Salaam,
When you invest in Mutual funds, your money is pooled together by the company and then invested in stocks, bonds, short-term debts etc.
As a Muslim, it is permissible for you to invest only in Halaal products and services, and it will be unlawful for you to invest in Haraam products and services, and also in interest generating funds/products.
With respect to Mutual funds, it is extremely difficult to identify where your funds are placed, since all the individual funds are placed into a pool of money and then invested in products which are unlawful at times, and may also earn interest. Therefore, it will not be permissible to invest in such mutual funds when you are not able to identify where your monies are invested
If your funds are invested in products that are Halaal, then the dividends will be halal for you, and also the increased share value price which you may cash in on will also be Halal. However, if your funds are invested in unlawful products or your monies are invested in products /securities that generate interest, then the dividends will not be permissible for you. In a like manner, if you cash in on the increased share value price over the initial investment, this will not be permissible for you.
And Allah Knows best
Mufti Waseem Khan
05/01/2024