What is Halal Investing?
Halal Investing is a term used to describe investing that is Shariah-compliant.
In modern parlance, halal investing can also be considered as a type of socially responsible investing.
As per the religious tenets of Islam, the objective of the Shariah is to protect and preserve five areas: religion, life, intellect, family, and property.
The following points form the six foundations of Shariah-compliant or Halal investing:
- Sharing of profit
- Prohibition of riba (unjust, exploitative gains)
- Gambling prohibition
- Investing in lawful activities only
- Upholding of ethical and moral values at all times
- Being successful and functional with the real economy
Which Investments are not considered Halal/Shariah-Compliant?
A lot of times, many investments violate one or more foundations of Halal / Shariah Compliant investing.
What must be taken into consideration is that a significant percentage of the Muslim population unknowingly and unintentionally invests money in:
- 401(k) Retirement Plan
- Individual Retirement Account (IRAs)
- Bank Accounts
These types of investments are not considered Halal/Shariah Compliant since they pay interests:
- Money Market
- Certificates of Deposit
- Municipal Bonds
- US Treasuries
- Corporate Bonds
So if you are starting off with Halal investing, ensure that you avoid these types of investments.
What are some Halal Investment options?
There are four common Halal investment options: investing in stocks, Businesses, Real Estate, and Cash.
What is Sukuk
Sukuk is an Islamic financial certificate similar to a bond in Western finance. Since the gathering of interest is considered as ‘haram’ in Islamic culture, most bonds are traded within the sort of sukuks.
Sukuk refers to a fixed-income product that complies with Shariah and provides steady returns rather than crazy growth.
Outline your investment goals, risk appetite, and the time frame for your investment, and commit to learning all you need to know about Shariah-compliant/halal investing.
