Non interest based investment

abdulinyourface

Hi

I have been following this site for quite some time but I have not actually found anything to which I can input to this site as everyone else seems to get there before me! Got some good people on this site!

My question is:

I see a lot of people recommending investments in terms of savings account, ISA's etc but this all involves interest which I'm not allowed to deal in.

What I ask is what is the best place to invest money where interest is not directly involved. For example I cannot use savings account based on interest etc but putting money towards a pension where the company pays some of it, as part of a "gift" is ok. Obviously any extra money on top is going to be interest but that can be easily calculated and given away to charity.

Last few days I have been looking on this specific forum about investing and the best way I can see is investing in an Equity Income fund. I don't know the ins and outs of this and whether or not it is totally based around intesrest or is it profit gained on shares and the interest is calculated as a percentage of that? Which means I can calculate the interest and give it away. Any help on this people is much appreciated.

Also If people have other suggestions on other ways of investing without interest being the sole benefit then I would very much appreciate it.

Remember: Profit is Good!! Interest is bad lol

Thanks for your help.

cheerfulcat

Hi there!

The income from an equity income fund comes from dividends, which are paid out of companies' profits. Any other gains come from gains in share prices/sales. Having said that, as I understand it investment in the banking sector is frowned upon ( because it involves making money from interest ) and most equity income funds will hold banking shares so that might be a problem? It depends on how strict you want to be. Another thing you might need to look out for is funds borrowing money to invest.

Property is a popular investment and needn't necessarily involve interest - you can get Sharia compliant mortgages - but this is possibly not the time to invest in property. BTW you can also get Sharia compliant funds but they may be more expensive.

There is a very quiet Islamic financial issues board on the Motley Fool; you might get a discussion going there.

HTH

Cheerfulcat

abdulinyourface

I'm more looking to invest my money to get a good return as current islamic banks savings accounts only have around 3% profit. So I'm looking for other alternatives where I can invest my money to get a better return but also have some flexibility with it unlike pensions where you're tied in till you retire.

I think with regards to the equity funds account not all companies have banking shares do they? I think the principles of this account is ok but you would need to find out exactly how the money is invested to make a decision further down the line. Or is this type of account wholly based around the banking sector? Therefore there is no way to be uninvolved. If so are there any accounts similar to it which are not involved in the banking sector?

Thanks

cheerfulcat

I think with regards to the equity funds account not all companies have banking shares do they?

These are not accounts like bank accounts. They are funds which you buy, and then hope that they go up in price. The fund manager invests in shares. You can lose money as well as make it.

In an equity income fund, the focus is very much on dividends ( the income part ) and I don't suppose there is a single one which doesn't have bank shares in it because a few banks pay fairly high dividends; Lloyds pays around 6.5% right now, for example.

If so are there any accounts similar to it which are not involved in the banking sector?

Assuming that by accounts you mean funds, there are certainly many funds which don't hold shares in banks but to be honest if it is important which shares you are invested in then it might be a better option for you to buy shares directly; that way you would know exactly what you were investing in. Alternatively, as I said, there are Sharia compliant funds which are run entirely on Islamic principles but still give an opportunity to make more than cash in the bank. There are also ethical funds, which are a little more mainstream and may suit your criteria.

HTH

Cheerfulcat

odLott

abdulinyourface wrote:

I'm more looking to invest my money to get a good return as current islamic banks savings accounts only have around 3% profit.

3% profit? Is that not interest with a different name?

dunstonh

Investment funds have investment aims, goals and rules. It would be a case of finding an investment fund which invests in areas that are allowed within your faith.

abdulinyourface

Hi

Sorry for my poor explanation in my last message. By account I meant funds account as you have correctly put.

I could do shares directly but since I have been out of the share loop for awhile then it will take some time to assess the market etc and get acquainted with it all. Which I intend to do but obviously in the mean time I want that money investing for me and not just sitting there doing nothing.

odLott: dont worry a lot of people think the same as yourself that it just seems to be interest named differently, but the money is invested in a specific way with specific intentions and goals and you get a percentage of the profit which is gained from the investment. Yes it sounds the same but the way it is invested etc and how it is perceived makes the difference between profit and interest. If that makes any sense! lol I'm sure there are people out there that can explain in better than I can.

dunstonh: i have read quite a few of your posts in this forum and can see you are quite financially aware about a lot of monetary issues and you are right, I need to find an investment fund which obviously doesn't deal with interest etc. They're probably as common as rocking horse poo and their rate is probably not as good as the main players but it will still be better than the savings profit rate, which I can now confirm speaking with someone at the bank, that it is actually at the dizzy heights of 2% and not the eye popping 3% I thought initially.

So yes if anyone has any ideas of investment in the short term without interest until I build a decent next egg to be able to invest larger sums to get a better return then it will be very much appreciated.

Thanks to all that has helped me so far.

:T

dunstonh

They're probably as common as rocking horse poo

There are about 50 unit trust funds available which are compliant. So you are right, the range isnt great but you can get equity investments if you wish.

However, you need to decide what type of investment you are looking for because you appear to be switching between savings and investments in your posts so far.

abdulinyourface

Thanks dunstonh

Would you be able to point me into the direction of these trust funds, hopefully via a link if that is easier. I've had a look at the citilink website but its a bit "all in the air" for me at the moment. Maybe you can direct me directly to the page in question? Much appreciated.

Secondly I'm switching between the 2 because I'm trying to make the point that there must be other ways for me to make a better return than just sticking my money into a savings accounts, thus I am comparing other investments to the standard savings account which is available to me, which isn't all that great.

Thanks for your help.

dunstonh

I cannot directly link as the references I found were all FSA authorised firms provinding advice on their own products. However, if you do a seach on google uk for islamic unit trusts you will find a number of sites come up which should give you the information you need.

Out here in Norfolk we dont have much need for islamic products. Tractor insurance maybe but not islamic investments . So my knowledge in this area is almost zero. If you are in an area where there is large islamic community, you may find that there are IFAs with far greater knowledge who would be able to assit you far better. I always think that when you seek advice you should speak to an adviser who specialises in the area you want and not a jack of all trades IFA or an IFA that is going outside their area of speciality.