My Islamic Finance Investment
Remember I told you guys earlier I divided my savings into a 60:40 ratio and decided to invest 60% of my savings. My first step was to invest 20,000 naira in Pettysave, well I hope you guys did not think the entire 20,000 naira was my 60% savings.
Today we will dive into my second investment in an Islamic finance investment fund and how it eventually panned out. I know what would be going through your mind is “What is Islamic Finance?” don’t worry your girl got you!
Islamic finance?
Islamic finance funds are basically investments that must be permissible under Sharia Law, that is, the money within the fund should be used following the principles of Islamic Law.
The basic principles of Islamic finance include:
· The parties involved in the Islamic finance activities share the profit, losses, and risk of those activities;
· Interest payments (also called riba) are not allowed;
· The use of the funds are restricted to Islamically accepted transactions, that is, no investment in alcohol, gambling, etc.;
· No investment in activities with excessive risk and uncertainties (also called gharar) and speculation is not allowed.
“So why Islamic finance investment you might be wondering”, well although Islamic finance is a form of ethical and moral investment, which is a perfect representation of my personality, I did not read the description of the investment fund. Lol
My first regrettable mistake-I got too comfortable with the security of the investment platforms and I started investing my money without even taking a second look at what I was investing in.
PLEASE!!!! Take out time to understand what you are investing in, if you do not understand the investment even after reading up on it, please leave it alone, there are other investments with better returns and better clarity”.
So let’s dive into my Cowrywise investment journey.
On my first use of the app, I was given a test to determine my risk appetite, the test showed I had a low-risk appetite and I was basically presented with low-risk mutual funds — imagine different individuals transferring their money to a specific bank account, and the investment manager uses that money to invest on behalf of these individuals, that my friend is a mutual fund. Basically, these low-risk mutual funds came with a low rate of return, imagine me seeing a 1.17% annual return, I was just like “Ki le Leyi?” These people don’t know I need money ni. After being turned off by the unattractive returns, I decided to browse through all their mutual funds, and I basically settled for a moderate risk investment with an 11.11% annual return.
So I invested 30,000 naira into this mutual fund. During my investment period, I was eagerly waiting for my returns, at least what I learned from my school work was that if it’s an annual return, you should receive your return monthly, quarterly, or semiannually. I don’t know if I was not seeing well during that period, because I was not seeing any form of return. Confused by everything I went to check the mutual funds again and behold I saw that I had invested my money in an Islamic finance mutual fund which included a non-interest-paying loan called Sukuk — which means the person which the money was lent to would not pay interest on that money, but rather investors would receive a share of the profit of the business which the money was invested in. Omo, my mind was like in this pandemic, profit? That wasn’t even all, I went down to read the investor suitability section and I saw “This fund is specifically designed for ethical investors with low-risk appetite. The fund is suitable for individuals and institutional investors seeking non-interest-based returns”. AHHH!!!! My village people blinded my eyes ooo!!!
I also realized at that time that the only way you can earn effectively from the mutual fund is from capital appreciation, like how will a non-interest-paying loan increase in value? I never learned that during my stay in school o, Oh Lord! To be honest, I was really heartbroken and I could not even talk to anyone about it, because I knew I would hear ‘who sent you message’.
Anyways, how did I get out of this? I waited for about two months watching the price of the mutual fund like a hawk — I regained my eye sight, and when my investment increased by about 1,000 naira, I sold it immediately. Because though the price of the mutual fund was steadily increasing, I knew that the investment was not for me. Well, at least I gained 1,784 naira extra after several months — 1,000 naira from capital appreciation and 784 naira from the 11.11% annual return, which is basically a 5.95% return on investment.
Final Words of Wisdom:
- Research Before You Invest.
