Best Halal Mutual Funds in India , Shariah compliant mutual funds, Tata Ethical Fund , Taurus Ethical fund and Reliance ETF Sharia BeES, Which mutual fund is halal in India.?, list of halal mutual funds in India.
Introduction
In last few years, the concept of Halal investing has gained considerable momentum worldwide, including India. Halal investment adheres to Islamic principles and ethical guidelines, ensuring that investments are free from interest (Riba) and avoid industries considered Haram (forbidden) in Islam, such as alcohol, gambling, and pork-related businesses. Halal mutual funds in India offer a compelling and accessible option for investors seeking to grow their wealth while staying true to their religious beliefs.
What are Halal Mutual Funds?
Halal mutual funds are investment vehicles that operate in accordance with Islamic principles. These funds invest in a diversified portfolio of Sharia-compliant assets, carefully selected to align with ethical and socially responsible guidelines. The fund managers ensure that the investments do not involve any Haram activities and are based on the principles of risk-sharing and profit distribution.
How do Halal Mutual Funds Work?
Halal mutual funds in India function on the basis of Mudarabah and Wakalah principles. In Mudarabah, investors provide the capital (Rabb-ul-Mal), while the fund managers act as Mudarib and invest the funds in Sharia-compliant ventures. Any profits generated are distributed between the investors and the fund managers according to a pre-agreed profit-sharing ratio. In Wakalah, the fund managers charge a fee for their services, and the investors bear the risk of their investments.
Here are some key details about halal mutual funds in India
1. Shariah Compliance:
Halal mutual funds in India are managed in compliance with Shariah principles, which means they avoid investing in companies involved in non-permissible activities according to Islamic law. A Shariah board, consisting of Islamic scholars and experts, reviews and approves the investment decisions of these funds.
2. Investment Guidelines:
Halal mutual funds follow specific investment guidelines to ensure Shariah compliance. Some of the common restrictions include avoiding investments in companies engaged in conventional banking, insurance, alcohol, gambling, tobacco, and adult entertainment. Additionally, they focus on investing in businesses that promote ethical practices, such as healthcare, technology, real estate, and halal food industries.
3. Screening Process:
Halal mutual funds employ a screening process to identify permissible investment opportunities. This process involves analyzing financial statements, business activities, and debt levels of companies to determine their compliance with Shariah principles. The screening is typically done by specialized agencies or Shariah scholars.
4. Asset Management Companies (AMCs):
Several asset management companies in India offer halal mutual funds. These AMCs develop and manage investment portfolios in line with Shariah guidelines. Some well-known AMCs offering halal mutual funds in India include Taurus Mutual Fund.
5. Performance and Returns:
Halal mutual funds aim to provide competitive returns while adhering to the principles of Islamic finance. The performance of these funds depends on the overall market conditions and the expertise of the fund managers. It is important to note that past performance is not indicative of future results, and investors should carefully evaluate the track record and reputation of the AMC before investing.
6. Regulatory Framework:
Halal mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI), which is the regulatory authority for the securities market. SEBI ensures that the funds comply with the necessary regulations and guidelines while protecting the interests of investors.
7. Account Opening and Investment Process:
To invest in a halal mutual fund, individuals need to open an account with the respective asset management company. The account opening process involves completing the required documentation, including Know Your Customer (KYC) norms. Investors can choose between lump-sum investments or systematic investment plans (SIPs) to invest in these funds
How to Identify Halal Mutual Funds?
To identify genuine Halal mutual funds in India, investors should consider the following factors:
1. Certification
Look for funds that carry a valid Sharia certification from reputable Islamic scholars or authorities. This certification ensures that the fund’s investments are in accordance with Islamic principles.
2. Investment Screening
Understand the fund’s screening process to ensure it excludes companies involved in Haram activities and adheres to strict ethical guidelines.
3. Transparency
Choose funds with transparent disclosure practices, providing investors with clear information about their portfolio holdings and investment strategies.
4. Track Record
Consider the fund’s historical performance and its ability to generate competitive returns over the long term.
Popular Halal Mutual Funds in India
Several financial institutions in India offer Halal mutual funds to cater to the growing demand for ethical investment options. Some of the popular Halal mutual funds in India include:
1. Tata Ethical Fund
The Tata Ethical Fund follows Sharia-compliant principles and invests in a diversified portfolio of equities and debt instruments.
Investment under the stewardship of a reputable Tata Mutual Fund enterprise manifests an allocation of nearly half, approximately 50%, in large-cap companies, with 35% devoted to mid-cap counterparts, and rest in small cap companies
You can do a minimum investment for Rs.5000 as lumpsum or Rs.500 as SIP(monthly investment).
Over the course of the past five years, this Fund’s returns have somewhat fallen short of the benchmark/Index. The expense ratio for the direct plan stands at 1.48%, which marginally leans towards the higher end. Should you choose to invest Rs. 1000 for a year, then they’ll simply charge you Rs. 14.8 upon you. However, this fee is prorated daily and subsequently deducted from your principal investment amount.
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2. Taurus Ethical fund
The investment objective of the scheme is to provide investors long term capital appreciation and growth through investments in Equity and Equity related instruments which are Shariah compliant
Managed by a Taurus Mutual Fund company and has practically 51% of interest in large cap, 28% in midcap and rest in little cap.
You can do a minimum investment for Rs.5000 as lumpsum or Rs.500 as SIP(monthly investment).
The profits of this asset has been exceptional than the file and furthermore than the Goodbye Moral Asset since the day this asset began as you can see underneath. Notwithstanding, the cost proportion is exceptionally high which is 2.03% as of now for direct arrangement.
3. Reliance ETF Sharia BeES
This is India’s most memorable Sharia-agreeable Trade Exchanged Asset (ETF) that tracks the exhibition of the Nifty50 Shariah List
99% of the investments in this fund are strategically placed in large-cap companies.
Functioning as an Exchange-Traded Fund (ETF), potential investors are required to possess a demat and trading account with a share brokerage company to participate in this fund’s opportunities. However, it is noteworthy that the expense ratio for this ETF currently stands at a mere 1.16%, which is nearly half the value of the expense ratio observed in the other two funds.
On a separate note, investors must also consider the annual fee payable to their respective broking companies for the maintenance of their demat and trading accounts. This fee varies across different broking companies. If you are already an investor in the stock market and possess a share market account, this fund may be a favorable option for you.
It is essential to acknowledge that the fund’s performance has been lackluster, with the compound annual growth rate (CAGR) remaining below 10% over the past decade.
Tips for Investing in Halal Mutual Funds
1. Clearly Define Your Financial Goals
Understand your investment objectives and risk tolerance before choosing a Halal mutual fund that aligns with your financial goals.
2. Consult with a Financial Advisor
Seek advice from a qualified Islamic financial advisor who can guide you towards suitable Halal investment options based on your individual circumstances.
3. Regularly Review Your Portfolio
Monitor the performance of your Halal mutual funds and assess whether they continue to align with your investment objectives.
4. Stay Committed for the Long Term
Like any investment, Halal mutual funds require a long-term approach to achieve meaningful returns while mitigating short-term market fluctuations.
Conclusion
Halal mutual funds in India provide a valuable opportunity for Muslim investors to participate in ethical and Sharia-compliant investments. These funds offer a diverse range of investment options, all of which are in accordance with Islamic principles. By investing in Halal mutual funds, individuals can grow their wealth while supporting businesses that promote social responsibility and ethical practices. As awareness and demand for ethical investment options continue to grow, Halal mutual funds are likely to play an increasingly important role in India’s financial landscape.
FAQs
Q1 : Are Halal mutual funds more volatile than conventional funds?
Ans: Halal mutual funds may have different risk profiles, but their volatility is comparable to conventional funds based on their asset allocation.
Q2: What is the minimum investment required for Halal mutual funds?
Ans: The minimum investment amount may vary depending on the mutual fund provider. It is essential to check with the respective fund house for specific details.
Q3: Can I withdraw my investment from a Halal mutual fund at any time?
Ans: Yes, investors can withdraw their investments from Halal mutual funds, but it is advisable to consider the fund’s exit terms and potential penalties, if any.
Q3: Are Halal mutual funds guaranteed to be profitable?
Ans : Halal mutual funds, like all investments, carry inherent risks, and there is no guarantee of profits. Before making an investment, investors should carefully consider their risk tolerance and investment goals.