4. Donating profits
Halal investors are often encouraged to take any money that comes from haram investments and donate it to charity. Whether it's supporting education, healthcare, or other important causes, donating to charity is a fun and empowering way to channel your halal investments towards something truly meaningful.
So overall, halal investing looks like investing in secure, low-risk opportunities while avoiding any association with unlawful industries or products. And if a small portion of your income does end up coming from those sources, you can feel empowered knowing that you’re able to donate it to charity and make a positive impact.
What halal investing looks like
There's a slew of options out there - from stocks to index funds to ETFs and even REITs - that fit within the guidelines for halal investing. And while there are certain investments that may not make the cut, that doesn't mean you have to sacrifice your returns or stick to a limited selection.
1. Stocks
By investing in company stocks selling halal-compliant products or services, you can support businesses that align with your values and beliefs. But don't be fooled into thinking this means you have limited options. On the contrary, there are plenty of financially stable companies out there creating amazing products and services that meet the halal requirements. So go ahead, do your research, and find those gems that fit your criteria.
2. Funds and ETFs
Funds like mutual funds, ETFs and index funds are all on the table as long as they match with halal principles. While it can be tough to track down funds with all halal components, there are shariah-compliant funds out there - and they're easier to find than you might think!
3. Real estate
Real estate is not only a great way to diversify your portfolio, but it can also be a halal investment as long as you're not profiting from the interest charged on mortgages. And if you're looking to earn some passive income, renting out property could be a smart move.
4. Commodities
But that's not all – halal investors also often turn to precious metals like gold as a way to protect their wealth. By investing in these tangible assets, you can have peace of mind knowing that your money is secure, no matter what happens in the market.
5. Sukuk
You should definitely check out sukuk, which is a sharia-compliant bond-like instrument used in Islamic finance. Compared to conventional bonds, sukuk involves direct asset ownership interest, making it a more ethical financial product. While both sukuk and bonds offer payment streams to investors, income derived from sukuk cannot be speculative, which ensures that it remains halal.
Halal Investing tips
1. Understand the concept of halal investing
Halal investing is investing in businesses that align with Islamic principles. These principles include avoiding investments in companies dealing in prohibited products, such as alcohol, gambling, and tobacco. Additionally, it also involves steering clear of businesses involved in haram (forbidden) practices such as riba (interest).
To maintain adherence to Islamic principles, halal portfolios typically comprise of companies that operate in sectors such as healthcare, technology, and consumer goods. Nevertheless, different halal funds and financial products often have varying criteria for investment.
2. Research halal investment options
It's important to note that not all halal investments will align with your personal values or financial goals. To find the best investment option for you, it's essential to research and compare different financial products and fund managers.
Different types of investment options are available for halal investors, including stocks, mutual funds, exchange-traded funds (ETFs), and more. Consider your risk tolerance as well as your investment timeline before making a decision.
3. Check the accreditation
Several Shariah supervisory boards certify businesses and financial products as halal. Before investing in any financial product, verify its certification with a reputable Shariah supervisory board or an Islamic financial institution. This will ensure that the product complies with Islamic finance principles.
4. Seek professional financial advice
Whether you're new to investing or have been investing for a while, it's crucial to seek the advice of an experienced financial advisor. They can help you navigate complex financial jargon and help you make informed decisions regarding your halal investments.
5. Stay informed about your investments
Once you've made your investments, it's essential to keep yourself up-to-date with the performance of the assets you own. The market constantly shifts, so it's essential to regularly monitor your investments and make adjustments if necessary.
The bottom line
Halal investing is a powerful way to both grow your wealth and make an impact. By choosing secure and low-risk investments that align with your values as a Muslim, you can rest easy knowing that your money isn't going towards any shady or unethical industries.
It's a win-win for your wallet and your community. Whether you're looking to generate short-term profits or a long-term nest egg, halal investing can help you achieve financial freedom while upholding your values.
