One of the popular investment products or instruments among investors is mutual funds. However, did you know that mutual funds are divided into 2 (two) types, namely conventional mutual funds and Islamic mutual funds? Of course, in order to determine the right investment and in accordance with your beliefs, you must first know the difference between conventional mutual funds and Islamic mutual funds.

Conventional mutual funds are mutual funds that can invest in all types of financial securities; such as stocks, bonds, and deposits; with investment limits as stipulated by the Financial Services Authority ("OJK"). Meanwhile, mutual and sharia mutual funds are mutual funds that can only invest in financial securities that comply with the principles and principles of sharia, and of course are still bound by investment limits set by the OJK. So that you are not confused about choosing between the two types of mutual funds, here are the differences between conventional mutual funds and Islamic mutual funds.

1. Principles and management

Sharia mutual funds are managed based on sharia principles and supervised by the Sharia Supervisory Board (DPS) together with the OJK. Meanwhile, conventional mutual funds are managed based on the principles of collective investment contracts and not based on sharia principles and are only supervised by the OJK.

2. The "cleaning" process

In conventional mutual funds, there is no term "cleaning" or cleansing the source of income by separating what is halal and non-halal. As long as it conforms to the investment provisions of the OJK, investment managers can sell conventional mutual funds. Meanwhile, in sharia mutual fund investments, the mandatory income "cleaning" process is known as Cleansing. The cleansing process means sorting out whether a company has illegitimate income or vice versa in doing its business.

3. Securities that become investment portfolios

In conventional mutual funds, investment in all securities is allowed. Meanwhile, for sharia mutual funds, investment is only allowed in securities that are included in the Sharia Securities List (DES).

4. Profit Sharing

In conventional mutual funds, profit sharing is made between investors and investment managers based on interest rate developments. Whereas in Islamic mutual funds, profit sharing is carried out between investors and investment managers based on Islamic sharia rules and mutual agreement.

5. Contract / binding

In Islamic mutual funds using sharia contracts which can include cooperation agreements (musyarakah), leasing (ijarah), and profit sharing contracts (mudharabah). Meanwhile, conventional mutual funds emphasize an agreement without any halal or non-halal rules.

Source: OJK.GO.ID