Shariah Compliant Stocks (2024)

FAQs

What makes a stock Shariah compliant? ›

Shariah-compliant funds have many requirements that must be adhered to. Some of the requirements for a Shariah-compliant fund include the exclusion of investments which derive a majority of their income from the sale of alcohol, pork products, p*rnography, gambling, military equipment or weapons.

Shariah indices exclude companies with Accounts Receivables/Market equity value greater than or equal to 49 %. In Shariah compliant companies, revenues from non-compliant activities are permissible only if the revenue from the non-permissible income is less than 5%.

The 5% Rule

This reasoning may apply to companies selling, for example, alcohol, pork, or earning some interest-based income. So, if a company's income from such sources exceeds 5% of its core business income, then investing in the company is considered haram (forbidden).

A Shariah-compliant fund needs to pass sector based and accounting ratio screens. Some of the Sector based Shariah exclusions are: Revenues from sales of Alcohol, Pork, Tobacco, Gambling, p*rnography, Conventional Financial Services, Conventional Insurance, trading of Gold & Silver on deferred cash basis.

There's no definitive answer to the question of the Apple stocks are deemed to be Halal. Although Apple isn't associated with any explicitly forbiddenactivities however there are a few features of the company's business that may be considered offensive to some Muslims.

Companies with significant involvement in certain business activities prohibited by Shariah law are deemed noncompliant. Activities that are generally considered noncompliant include conventional financial services, alcohol, tobacco, gaming, pork, p*rnography and most conventional media organizations.

Since Tesla is not involved in any of those industries, its stocks are considered Shariah compliant.

Halal Investment Guidelines

Islamic principles require that investors share in profit and loss, that they receive no interest (riba), and that they do not invest in a business that is prohibited by Islamic law, or sharia.

So, based on the data mentioned above, we can say that Coca-Cola stock is an excellent option for Muslim investors because it passes all the criteria to be found halal and not haram. However, some other platforms run extra screening analysis to check the stock's compliance status.

In shariah, there is not any written upper limit of profit that can be illegal. What is more, it depends on trading conditions, geographical locations, time, and supply and demand, and so on. There are some principles for earning profit in shariah.

What is the 7% rule in stocks? ›

Always sell a stock it if falls 7%-8% below what you paid for it. This basic principle helps you always cap your potential downside. If you're following rules for how to buy stocks and a stock you own drops 7% to 8% from what you paid for it, something is wrong.

There are some important assumptions to note about the rule. Chief among them is the underlying investment portfolio's mix. The 4% rule presumes half of your retirement savings is held in stocks for the entirety of your retirement, while the other half comprises bonds and other fixed-income investments.

While Islam does not typically ban investment, many practising community members cannot invest in companies that produce or sell religiously restricted products, which means it can be difficult to invest in accounts or financial products that may touch various sectors of the economy.

Buying stocks is not haram in general. As long as the company's shares are per Shariah principles, Muslims can invest in that stock. When you are a stock owner, you own a small percentage of the business. However, it is essential that you need to make sure the company in question is aligned with Shariah rules.

Halal investors can buy stocks as long as they're not from companies operating in prohibited industries or in a prohibited way. For example, buying stock in a liquor company such as Pernod Ricard would not be allowed, as alcohol is not permitted for Muslims.

The S&P 500® Shariah includes all Shariah-compliant constituents of the S&P 500, the leading benchmark for the U.S. equity market.

Shariah compliant investment or also known as halal investment is an investment that is based on the principles of Islam and according to the shariah law. Shariah law is Islamic laws that has certain prohibition. The investment must not have elements that involves riba, gharar (speculation), and maysir (gambling).