Mutual funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of securities. In Islamic finance, there has been a shift toward more sophisticated trading methodologies by fund managers, including leveraging techniques. Mutual funds offer benefits such as risk minimization, low costs, liquidity, tax benefits, and access to securities. Sharia-compliant mutual funds adhere to Islamic legal principles, such as avoiding interest, uncertainty, and prohibited elements like pork and alcohol. Various models of contractual relationships are used in fund management. The permissibility of investment instruments like equities depends on sharia compliance, and opinions on guaranteeing invested capital vary among scholars. Islamic mutual funds have governance structures guided by sharia principles, including oversight by a sharia board. Factors such as sharia compliance and environmental, social, and governance (ESG) considerations influence mutual fund performance, while seasonal effects (e.g., Ramadan effect) also impact fund performance. Compared to conventional mutual funds, Islamic mutual funds exhibit varied performance outcomes, with some studies suggesting parity, while others indicate underperformance or superior performance. However, Islamic mutual funds generally exhibit lower risk and greater resilience during crises.