This chapter aims to identify some important misconceptions about Islamic banks, which impact on investor’s portfolio in term of threats, challenges and opportunities. This study attempts in five layers of misconceptions such as the first layer defines the ideology of layman about Islamic banks. However, this layman has no any account in interest-bearing and non-interest-bearing financial institutions. Whenever someone asks him about Islamic banking, he says strictly and straight that Islamic banks are prohibited without any theoretical and practical evidence. The second layer consists of those people who deal with Islamic banks. Actually they have misconceptions about the mechanics and product structure either on the liability side or on the asset side. The third layer consists of economists, who know economics very well but unfortunately they do not have solid grip on fiqh (فقه). The fourth layer consists of Islamic economists, who have sufficient knowledge of both economics and fiqh (فقه), but they still didn’t believe and properly unable to understand the working method of Islamic banking. The fifth layer consists of Islamic scholars, those have good knowledge in fiqh (فقه), but they don’t have a sufficient knowledge about financial system like asset driven, liability driven, spread, securitization and credit creation. However, 132 questionnaires were distributed among investors of Islamic financial institutions and multiple regression of least significant difference (LSD) method implied for data analysis. The results of this study show that two variables such as opportunity and challenge out of three are positively significant, and the rest of one as threat is insignificant.