Unit trusts are among the investment instruments that are often chosen by many to grow their savings and generate long-term returns.
However, for investors, especially Muslims, the most important question is whether these unit trusts are sharia-compliant or not?
The fact is, not all unit trusts are sharia-compliant even if they are offered by the same company. Therefore, it is important to know how to differentiate them before making an investment decision.
1. Pay attention to the name of the fund.
Usually, sharia-compliant funds will use words like 'Islamic' or 'Shariah' in the product name.
For example, fund management companies such as Public Mutual and Kenanga Investors offer both conventional and sharia-compliant fund versions.
The difference is clear in the name and investment objectives of the fund.
2. Check the Official Approval from the Securities Commission of Malaysia.
This body is responsible for listing funds and securities approved as sharia-compliant in Malaysia.
If the fund is on their official list, it means that the fund has undergone Shariah screening and monitoring.
3. Having a Shariah Advisory Committee to Monitor the Fund's Investments.
This ensures that investments do not involve elements of usury, gambling, alcohol, tobacco or businesses that contradict Islamic principles.
In fact, the debt ratio of the company being invested in must also comply with certain guidelines.
4. Conventional Unit Trusts Are Not Subject to Shariah Restrictions.
It can invest in any sector including conventional banking and gambling companies, as long as it is legal from a legal perspective.
In conclusion, the easiest way to distinguish a sharia-compliant unit trust is to check the fund name, fund fact sheet and confirmation from the Securities Commission Malaysia.
Investing with knowledge not only helps generate returns, but also gives peace of mind because it is in line with the principles we hold
