Is there a judgment about investments such as investment fund and equity issuance in our religion?
A Brief Description of the Question:
Is there a judgment about investments such as investment fund and equity issuance in our religion?
The Answer:
Firstly, we need to give information shortly about what an investment fund is and how this draws income:
“Portfolio” with its full meaning, means the total of the properties owned by a person or a foundation. Portfolio with its narrow meaning means a group of properties consisting of capital market instruments and precious metals. Investment funds manage portfolios, which consist of capital market instruments such as equities and bonds, and precious metals, with the money gathered from people. Each investor becomes a sharer of the fund by taking a participation certificate which represents a part of portfolio owned by the fund. You can earn money from your investment fund via these three ways:
1. A fund may earn income in the form of dividends and interest on the securities in its portfolio. The fund then pays its shareholders nearly all of the income (minus disclosed expenses) it has earned in the form of dividends.
2. The price of the securities a fund owns may increase. When a fund sells a security that has increased in price, the fund has a capital gain.
3. If the market value of a fund's portfolio increases after deduction of expenses and liabilities, then the value (NAV) of the fund and its shares increases. The higher NAV reflects the higher value of your investment.
Explanations above show that income gained through investment funds also consists of interest. There are investments funds which do not make use of interest which is haram both in Islamic countries and West. However, the investments funds in Turkey are not freed from interest yet. For this reason, having the share in investment funds and making money through them is not permissible.
Prof. Dr. Hayrettin Karaman
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