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Money 104: Mutual Funds

Part of the Series — Money: The Arms Turn Wings Way

Disclaimer: This content is provided for educational and informational purposes only and reflects the author’s personal views, research and experience. It is not personalized financial, investment, legal or religious advice, nor a recommendation to buy or sell any investment. Readers should do their own research and, where appropriate, seek advice from qualified professionals or scholars.

Start with funds. Let experts invest.

In Money 103, we talked about buying assets. Now the question is: how?

You might not know how to analyze a company. You might not know how to value a property. You might not know how to time the gold market. You might not have the time or the desire to learn any of that right now.

That is where mutual funds come in.

A mutual fund (also called an investment fund) is a product where experts manage small investors’ money for a specific investing goal. Many people put their money in. A professional manager pools it together. And the fund invests it according to a stated strategy.

You buy a unit in the fund. The fund does the work. That is the whole idea.

The types of funds

There are several kinds of mutual funds. Each one has a different purpose.

Money market funds. These invest in short-term instruments like Islamic bank investment certificates, short-term government sukuk, and Sharia-compliant bank deposits. These are the Islamic alternatives to conventional certificates of deposit, Treasury bills, and interest-bearing deposits. They aim for stable returns and easy access to your money. They are low risk, but returns and capital are not guaranteed.

Fixed income funds. These invest in instruments like government sukuk, corporate sukuk, and Islamic bank investment certificates. They aim to provide income. They are medium risk. Their value can fall if market conditions change or if issuers face financial difficulty, but they are less risky than equity funds.

Precious metals funds. These invest mainly in gold, and sometimes silver. They are a hedge, not a growth engine. You use them to protect against inflation or currency problems, not to get rich quick.

Real estate funds. These invest in property. Some buy and sell. Some buy and rent. Some do both. They give you exposure to real estate without you having to buy a building yourself.

Mixed funds. These invest in more than one type of asset. A fund might combine fixed income with stocks. Or fixed income with gold. Or fixed income with stocks and gold. Or fixed income with real estate, gold, and stocks. Any combination of two or more is possible. The manager decides the split, or the fund’s rules state it in advance.

Equity funds and index funds. Equity funds invest mainly in stocks. They aim for long-term growth, but they are high risk. Index funds follow a particular market index instead of selecting companies individually. For example, an equity index fund might track the EGX 30 or the EGX 33 Sharia. ETFs (exchange-traded funds) are funds traded on stock exchanges. Many track indexes, but ETFs can also invest in other assets or follow actively managed strategies. Index-tracking funds often have lower management fees than actively managed funds.

Two examples worth knowing:

EGX33 Sharia is the Sharia-compliant alternative to the EGX 30, Egypt’s flagship blue-chip index. The EGX 30 tracks the 30 largest and most active companies, including interest-based banks and other businesses that may not be Sharia-compliant. The EGX 33 Sharia filters those out. It only includes companies that pass Sharia screening. It was launched in June 2024 as the first Sharia-compliant index in Egypt.

HLAL and SPUS are Sharia-compliant alternatives to the S&P 500, the main index of large US companies. The regular S&P 500 includes banks, alcohol companies, and other businesses that are not permissible. HLAL and SPUS screen those out.

  • HLAL tracks the FTSE USA Shariah Index, which screens a broader US universe than just the S&P 500. It includes more mid-cap exposure and a different sector mix.
  • SPUS tracks the S&P 500 Sharia Industry Exclusions Index. It holds around 200 Sharia-compliant stocks from the S&P 500, and focuses on companies with low leverage and debt-to-market-cap ratios below 30%. It is managed according to AAOIFI Sharia guidelines.

Both give you exposure to the US market without the companies you would want to avoid.

You can start small

One of the biggest advantages of mutual funds is that they let small investors access markets that would otherwise be out of reach.

Real estate. Buying a single unit or a small apartment requires large capital. Most people cannot do it until they have saved for years. But a real estate fund lets you invest in property with a small amount. You own a piece of the fund, and the fund owns the real estate. You get the exposure without needing the full price of a unit.

Gold. To own physical gold, you usually have to buy an ingot, a coin, or a minimum weight. You also need a secure place to store it. A gold fund removes both problems. You can buy with smaller amounts, and you do not have to worry about storage or safety.

And with a fund, you do not have to buy at one single entry point. You can buy in smaller amounts over time. This is a real advantage. If the price goes down after you buy, you do not feel stuck, because you will purchase again at the lower price and lower your average. If it goes up, you already own some. Either way, you keep moving forward instead of waiting for the perfect moment.

This is the same idea that runs through the whole post. Mutual funds take markets that were built for large investors and open them to everyone.

The Sharia question

As discussed in Money 101: Clean Money:

“Nothing in this post is a ruling. I’m not qualified to issue one, and this blog is not a place to look for one.”

“Which scholarly opinion to follow remains a personal choice.”

Some funds go further than others. In Egypt to be called a Sharia-compliant fund, a fund has to appoint a FRA Licensed Sharia board to review its activity. The board checks what the fund invests in and confirms that it stays within the limits. Those limits are almost the same ones from Money 101: no interest, no alcohol, no gambling, no adult entertainment, and nothing built on someone else’s harm. The fund’s prospectus will name the board if one exists.

Other funds do not appoint their own Sharia board. They may never be classified as a Sharia-compliant fund by Egypt’s Financial Regulatory Authority (FRA). But they still invest in a Sharia index, like the EGX33, and its constituents, the companies that make up the index. Those companies are already certified as Sharia-compliant by scholars who revise the index twice a year. They are the 33 largest Sharia-compliant stocks available on the EGX. This saves the cost of a board. But it means you have to check what the fund holds beyond those companies, like its liquidity, its cash, and any other instruments it uses.

So the same rule applies here as everywhere else in this series: you need to know what the fund actually invests in.

Even Islamic Compliant Mutual funds may still have some doubts from certain scholars, because the detailed workings of the fund are not always fully transparent. But they are clearly more cautious than options that follow no criteria at all. They appear to be the most Sharia-compliant investing options available today.

The more this market grows, the more companies move toward it. Ten years ago, there was no Sharia index in Egypt at all. Since more people showed interest, the EGX33 came to life in 2024. The same happened with SPUS and HLAL in the US. Many investors wanted Sharia-compliant access to US stocks, and those funds were created to meet that demand. Islamic banks are the same story. They are growing. They still have issues. But they are improving year by year toward what Sharia wants from a bank.

What to read before you invest

The fund’s prospectus is the document that tells you what you are actually buying. It tells you everything the fund is allowed to do. Read it before you invest.

It covers:

  • The fund’s investment objective and strategy
  • The types of assets it can hold
  • The fees and expenses
  • The rules for buying and redeeming units
  • The fund’s Sharia board, if it has one
  • Any restrictions or conditions

The fund’s name and its marketing materials may be clear. The prospectus is the source.

If the prospectus is long, start with the sections on investment policy and fees. Those are the two that matter most. Then read the rest.

Do not invest in a fund whose prospectus you have not read. If you cannot find the prospectus, ask the fund manager or the platform you are using. It should be available to you.

Once you have read the prospectus, the most important thing to look at is how they allocate the fund’s money. A fund might say:

  • 90% stocks and 10% fixed income
  • 50% stocks and 50% fixed income
  • 90% gold and 10% fixed income
  • 100% fixed income

That allocation tells you the risk and the nature of the underlying assets. A fund that is 90% stocks will swing up and down. A fund that is 100% fixed income will be stable but modest.

Do not just read the fund’s name. Read the allocation. Read what it actually holds.

Examples of funds in Egypt

Here are some funds available in Egypt. This list is not complete, and fund offerings change, so verify the current status before investing.

Money Market Funds with an appointed FRA Sharia board:

Equity Funds with an appointed FRA Sharia board:

Precious Metals Funds with an appointed FRA Sharia board:

Mixed Funds with an appointed FRA Sharia board:

Funds without an appointed FRA Sharia board but tracking the EGX 33 (Sharia-compliant index):

Funds without an appointed FRA Sharia board but investing actively in EGX 33 companies (Sharia-compliant index):

The EGX 33 is an index of the most Sharia-compliant stocks on the Egyptian Exchange, according to the EGX Sharia Board. A fund that tracks it is not necessarily Sharia-certified itself, but its underlying holdings are screened for compliance. Read the fund’s documents to confirm & make your decision before you invest.

Why funds are a good starting point

You do not need to become an expert first.

You do not need to pick individual stocks or evaluate properties.

You do not need a large amount of money. Many funds let you start with a small amount.

You get diversification. Your money is spread across many holdings, not concentrated in one.

You get professional management. Someone whose full-time job is investing is doing the work.

This is why funds are often the first investment a person makes. They are the entry point.

Are Mutual Funds in Egypt safe and regulated?

One more thing needs to be said, because it comes up often.

Mutual funds in Egypt are approved and supervised by the Financial Regulatory Authority (FRA). The FRA is the government body responsible for regulating and supervising all non-banking financial markets in Egypt, including capital markets, investment funds, and insurance. Every mutual fund available to the public has to be licensed and approved by the FRA.

And it is not just independent fund managers. Many banks in Egypt, regulated by the Central Bank of Egypt, also offer mutual funds to their customers. These funds are subject to double oversight: the bank itself and the FRA.

So when someone tells you these products are “unregulated” or “risky because they are new,” that claim does not match the facts.

Why the claim exists

The traditional certificate of deposit has been the default savings tool for Egyptians for decades. It is familiar. It is simple. And it is one of the biggest profit channels for banks.

But for the individual saver, it has a serious weakness. According to the Central Bank of Egypt, you cannot redeem any money at all in the first six months. After that, if you redeem before maturity, which is often three years or longer, you lose part of your profit as a penalty.

Mutual funds, especially money market and fixed income funds, offer a different deal. They are liquid. Many offer daily redemptions without subscription or redemption fees. They are regulated. And they give you options that certificates do not. But the rules, fees, and settlement times differ between funds, so always check the prospectus.

So the pushback you hear is not really about regulation. It is about competition. In the last couple of years, the funds have been drawing money away from a product that has been very good for banks and not always good for the people holding it.

That does not mean certificates of deposit are bad. They are not. The same applies to the Islamic equivalent, whether your bank calls it Sukuk, an Islamic investment certificate, or something else.

Full Islamic banks: Al Baraka Bank Egypt, ADIB Egypt, Faisal Islamic Bank of Egypt.

Islamic windows of government-owned banks: Banque Misr Islamic (Kenana), NBE Islamic (Al-Azhar and Tahrir branches), the Agricultural Bank of Egypt’s Islamic branches.

Islamic windows of private banks: First Abu Dhabi Bank Egypt (FAB, formerly Audi), The United Bank (Rakhaa Islamic branches), SAIB Islamic branches, Suez Canal Bank Islamic branch, NXT Bank Islamic branch, NBK Egypt Islamic branch, and EG Bank Islamic branch.

Each one (Sharia-compliant mutual funds and Islamic certificates of deposit) has its own benefits, and both should have a place in your portfolio.

A note for younger readers

If you are still at school, this post is for you too.

You may not have enough money to open a fund account yet. But you can learn how they work.

Ask your parents. If they invest in funds, ask them what they own and why. Ask them to show you the fund’s documents. You will learn more from one real example than from ten articles.

Start with a goal. If you want to invest one day, know what you are investing for. A fund for a car is different from a fund for retirement.

Read the allocation. When you look at any fund, find the section that says how the money is invested. That is the most important page.

Read the prospectus. If you can, look at the full document. It tells you what the fund is allowed to do, what it costs, and what rules it follows.

Remember the Sharia question. If you want your investment to be halal, check whether the fund has a Sharia board or tracks a Sharia-compliant index. If it does not, read what it holds.

You do not have to wait until you are grown up to start learning. You can start with the next question you ask.

Why Egypt, and where to start

Many investors worldwide choose Egypt as a market with real potential. The economy is large, the population is young, and the market is still developing compared to more mature ones. There are risks, including currency fluctuations, but there is also opportunity.

If you are in Egypt and want to start investing in mutual funds, one of the best apps to use is Thndr. Thndr also has a large collection to choose from. It also gives you access to the UAE stock market and the US stock market if you want one app with different currency exposures, or if you have $20,000 or more and want to spread your eggs across different baskets.

Thndr Alpha: Wealth Assistant

Thndr also offers Alpha, an investment selection and allocation tool provided by Rumble, a research entity licensed by Egypt’s Financial Regulatory Authority.

Alpha asks about your investment goals, risk tolerance, time horizon, Sharia preferences, and emergency savings. It then suggests a combination of mutual funds, potentially including gold, equity, and money market funds.

You can change the proposed allocation yourself, and no investment order is executed without your explicit approval.

It can be a useful starting point, but you should still understand the funds and their risks before investing.

If you decide to use Thndr, you can use a friend referral link. You will both earn a cash reward to invest, based on the Thndr Referral Program and subject to its qualification rules.

Where this goes next

Next, we look at stocks: how to buy them directly, what to look for, and how to think about picking individual companies instead of funds.

But funds are a good place to start. They give you exposure to the market without requiring you to be an expert. And they let you begin building assets while you learn.

You do not need to know everything to start. You need to know enough to begin, and the willingness to keep learning. Mutual funds let you do both.

Further Reading

  • FRA Islamic Investment Funds (Arabic) — The Financial Regulatory Authority’s official list of licensed Islamic investment funds in Egypt. This is the most authoritative source for verifying which mutual funds are officially recognized as Sharia-compliant. Also, their website publishes Islamic Investment Funds Subscription Prospectuses. The FRA also publishes research on Islamic investment funds.
  • How Mutual Fund Orders Work (English) — Thndr’s guide on how buying and selling mutual fund units actually works. It explains the cut-off times for orders, how the price is determined, and when your order gets executed.
  • Pros & Cons of Investing in Mutual Funds (English) — Thndr’s guide to the advantages and drawbacks of mutual funds. It covers professional management, diversification, and liquidity on the positive side, and missed opportunities and management fees on the negative side. It also explains the SMART goals method for setting investment objectives.
  • How to Pick a Mutual Fund (English) — Thndr’s checklist for choosing a fund. It walks through five questions: what the fund invests in, its risk level, its investment strategy, its past performance, and its fees. It also explains how to evaluate the management team and the fund’s volatility.
  • Money Market Funds vs. Equity Funds (English) — Thndr’s comparison of the two main types of funds. It explains that money market funds offer stability, liquidity, and low risk but limited returns, while equity funds offer growth potential and diversification but come with volatility and higher risk.
  • EGX33 Shariah Methodology (English) — The official Egyptian Exchange page explaining the methodology behind the EGX33 Shariah index. It covers the screening criteria, the Sharia board, and how companies are selected and reviewed.
  • How to Find Sharia-Compliant Investments on Thndr (English) — Thndr’s guide to finding Sharia-compliant investments on their platform. It explains what makes a company Sharia-compliant and how to filter for those options.
  • Mubasher Fund Directory (English) — A financial data platform with a directory of mutual funds in Egypt. You can see each fund’s price, performance, and details.

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