buying pre-IPO shares for mutul fund introduced through a conventional bank

MohammedMaksudul

MohammedMaksudul

May Allah Forgive us
:salam2:

Hope all brothers and sisters are in good health InshAllah. I recently have been forced to buy shares in Dhaka Stock Exchange of a Mutual fund introduced through a conventional bank. I am being told that Mutual Fund shares are there to keep the market steady and is of no profit to the bank. The method by which I will have to buy the shares will be a pre-IPO placement, which is basically booking a certain volume of shares previously to the lottery that will be conducted, as for regular primary shares. Any brother or sister with knowledge on this matter, as I have very little on this, please shed some light on the subject and help me out. I am in need of some good answers, urgently.
 
abu'muhammad

abu'muhammad

Junior Member
Assalaamu alaykum,

The mutual funds have units, the shares are for stock markets and you bought 'units' of mutual fund.

The types of mutual funds are – equity mutual funds, debt funds, hedge funds etc. The equity funds have majority imvestments in equities issued by stock companies, the debt funds have investments in interest based systems or 100% riba system, the hedge funds do not have particular investment criteria, and invest as according to the conditions of stock markets and prevailing economy.In high markets hedge funds have sell strategy.

The mutual funds (MFs) make port-folio.

Port-folio is the distribution of assets that is - upto55 – 85 % of MFs into equity of various companies.The companies may be upto 100 as included, then debt instruments 5-10% and keeping some cash upto 5% for managing the costs of running particular mutual fund.The Mf have Initial Public Offer (IPO) at the base prices.As for example Rs 10 per unit in India.

There are two concerns from islaamic view .

1)Some companies in which investments are made are not compliant with the shariah. That is some of the companies might be producing liquor, media entertainment, bankings and other areas that directly or indirectly have incomes that do not comply with shariah. The concern is the profit from those companies is also reflected in NAV ( net Asset value) of MF. So here haraam income mixes.

2)All the MFs make more or less investments in debt instruments that is interest income.

For the above reasons the investments in Mfs do not become compliant with Islaam.further there are rulings depending upon the investments, the situations and conditions, etc. so for proper outlook for your investments and the concerned situation better is to seek the scholar. I am saying what is general and obvious.

Hence instead I will suggest to buy land, property or stock of halaal company and have 100% halaal income, inshaAllaah.

Working of Mf depends upon how the companies in which money invested progresses. As an example when unit is bought and if the fund performs well there is a profit, if not then there is loss. It is not guaranteed only profit. The Mfs write in prospectus – ‘Performance of fund is based upon the market conditions’. but Most investors skip this remark and understand that investing in Mfs is only profitable.

Allaah knows the best.
 
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