What is a Sharia Mutual Fund and How is it Divided?

What is a Sharia Mutual Fund and How is it Divided?

What is a Sharia Mutual Fund and How is it Divided?

Nowadays, sharia mutual funds are ogled by many people, especially for those who think that investment is usury. The problem is that the way mutual fund investment works is that the funds disbursed by investors will be fully managed by the mutual fund provider company.

It is not surprising that many people choose to invest in the sharia sector because the instrument works following the principles of religious law. The point here is that the investment manager will divert customer funds to companies labeled halal.

So, the funds under management will not be placed in companies that sell and buy cigarettes, liquor, non-halal food, and the like. Investment managers will only manage mutual funds that are registered in the Sharia Securities List (DES).

Meanwhile, the investment contract will be divided into three principles, namely cooperation ( Masyarakat ), leasing ( Ijarah ), and profit-sharing.

For those of you who are interested in investing in this one, see the full review below.

The difference between Islamic and conventional mutual funds

As explained above, the securities used as portfolios are securities that do not conflict with sharia principles in the capital market where the instruments chosen by the investment manager are in the form of sharia shares, Sukuk, and other sharia securities.

Then what is the difference with conventional mutual funds?

1. Different sectors and industries

Conventional mutual funds have basic assets in general that are not restricted from certain sectors or industries. So, it is possible that investment managers can divert funds belonging to investors to sectors or industries that are not halal. 

2. Can be for charity

Another difference between conventional and sharia mutual funds is that there is a cleansing feature or the process of cleaning mutual funds from income that is not following sharia principles. Later the income will be used for charitable purposes.

The income is in the form of funds deposited in a custodial bank, which is an institution that acts as a collective depository and assets such as stocks, bonds, and others. Unfortunately, no custodian bank comes from Islamic banks.

So, the deposited funds will certainly get interested from the bank. Therefore the interest will be diverted to charity.   

3. Lower risk

Islamic mutual funds have a lower risk than conventional mutual funds because companies that want their shares to be included in the DES may only have a total debt that is smaller than assets.

With a small total debt, the company is said to be quite healthy and its shares will generate a fairly high return. That is why the company's profit turnover tends to be stable so that the risk of default on its debt is also small.

4. Supervised by the Shariah Supervisory Board (DPS)

Apart from being supervised by the Financial Services Authority (OJK), Islamic mutual funds are also supervised by the Sharia Supervisory Board (DPS), which does not apply to conventional mutual funds. In fact, DPS will also directly assist investment managers for such as giving directions, considering social funds to develop sharia investment products.

Also Read: Getting to Know Mutual Fund Products and How to Develop Wealth!

So, now you know what are the differences between the two mutual fund investments? To be more confident in investing in the Islamic market, let's look at the facts below:

Sharia mutual fund facts

Seeing the high public interest in sharia investment, OJK has released facts about the product. Here are some of them:

Sharia investment products are guaranteed sharia by DPS

Funds are managed by a special unit and sharia investment manager

Has a large selection of products and is based on the first foreign sharia securities in Indonesia

Has an average growth of the market cap of the highest

Available offline and online.

For this reason, sharia mutual funds can be the right choice for those of you who want to invest but still follow the religious path. How to? Here's the complete guide: 

Sharia mutual fund investment guide

There are several steps that you need to do when you want to transfer funds to the sharia sector. Anything? Follow the method here:

1. Choose sharia products

The first step you need to do is to choose an investment manager who focuses on selling sharia products. That way, the funds you disburse will be directly transferred to securities registered with DES.

Now, many asset management companies offer Islamic investments. You can even check it directly on the official Bareksa website by selecting the sharia category. Not only that, but you can also see the performance of the investment manager according to the type of mutual fund.

2. Starting from 100 thousand

Although this industry and instrument sector is limited, the initial capital is the same as conventional mutual funds, which can start with Rp. 100 thousand. Still pocket-friendly, right? 

3. Not required to deposit every month

For sharia and conventional, they choose almost the same way of working. One of them is being able to top-up funds at any time. So, you don't have to deposit every month. However, the investment is closely related to the goal.

If you want your investment goals to be realized, then consistently top-up funds are one of the best ways.

Also Read: Profit 89% Per Year, These are 4 Types of Mutual Funds and How They Work!

4. How to choose a product

For how to choose products, both sharia and conventional also have similarities. The first step is that you have to know your risk level. For example, stock mutual funds are known as high return-high risk, namely, the yield and risk are equally large.

So, if you are not a reckless type of person, you should choose another mutual fund instrument with a more stable movement, such as money market mutual funds or fixed income mutual funds.

However, if you intend to make it a long-term investment, stock mutual funds are certainly highly recommended.

5. Buy online

Along with the development of increasingly sophisticated times, now you can also buy sharia investment products online such as conventional mutual funds. In addition to saving time, you can also find out complete information about investment managers and their performance. 

However, before buying sharia products online, you must already know and understand the risks of the type of mutual fund you choose so that you can reap maximum profit. 

6. Monitor and sell

Even though the funds you transfer are managed by an investment manager, you still have to monitor the movement of the instruments you buy. Especially for those of you who choose short or medium-term investments. 

So, you can find out when is the right time to sell your mutual funds. That way, you can find out the benefits you get.

Calculation of the profit of sharia mutual funds

Monic works in a private company with a salary of Rp. 4.3 million. Even though he earns the minimum wage, it doesn't mean that Monic can't invest. The reason is, the investment capital is taken from a few percent of your income, not how big the nominal is.

If you follow the 50/20/30 theory, then Monic must set aside 20 percent of her income, which is Rp. 860 thousand, for investments and savings. If it is divided into 50 percent, then every month Monic will invest Rp. 430 thousand.

The estimated return of Islamic mutual funds is 10.31 percent. How much return will Monic get if she regularly invests IDR 430 thousand every month?

Nominal investment per month: IDR 430 thousand

Term: one year

Return per year: 10.31 percent

So, IDR 430 thousand X IDR 12 months is IDR 5,160,000. With a return of 10.31 percent, it means that Monic gets a return of Rp. 5,160,000 X 10.31 percent, which is Rp . 531,996 . That's great right?

Also Read: Beginner Investors Must Know These 10 Investment Worlds To Make Money Abundant!

Expand your treasure chests

Through investment, you can indeed make a lot of rupiah coffers. However, you can develop your wealth by getting into the business sector.

You can use the profits from the investment to set up a business and rely on Pintek to expand your business.

If your business is already running, you can rely on Pintek to get funding to make your business more successful and generate lots of profits.

To get funding from Pintek, you can apply for a PO Funding loan and have the opportunity to get funding of up to billions of rupiah with effective interest ranging from 1.5 percent to 2.5 percent.

Education vendors only need to guarantee ongoing invoices or bills. These funds can be used to fulfill school orders such as the procurement of laptops, books, and others.