A Guide to Halal Investing in The US
A Guide to Halal Investing in The US
Investing according to Islamic principles means choosing halal* (permissible) investments and avoiding those that are haram (forbidden). Halal investing in the US focuses on ethical and responsible investments that offer long-term stability and avoid high-risk speculation.
On the other hand, haram investments are those in companies that deal with alcohol, pork, and financial services involving interest. These investments are considered high risk since they involve short-term speculation and are akin to gambling.
What Investment Options are Halal or Haram for Muslim Americans?
There are dozens of investment options in America. However, knowing which are halal or haram under Shar'iah law is crucial. The table below shows several assets for halal investing in the United States.
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Let’s break these asset classes down and consider how they are haram or halal investments.
Stocks/Funds/ETFs
Stocks, funds, and ETFs (exchange-traded funds) are popular investment options that allow individuals to own a piece of a company. Individuals invest in these assets to grow their wealth and earn dividends.
These investments can be halal if the companies involved pass Shar'iah requirements. That means they must operate in permissible sectors, have low debt levels, and engage in ethical practices.
Some options for investing in these assets can be done via:
- Wahed: By investing with Wahed you gain exposure to both domestic and global equities through our ETFs. All of our halal investments are structured in accordance with the strictest Islamic principles.
- Amana Mutual Funds: A private equity fund that adheres to strict Islamic principles and supports SMBs (Small and Midsize Businesses) growth.
- HSBC Amanah Global Equity Index Fund: A Shar'iah-compliant Exchange Traded Fund (ETF) that tracks the returns of the Dow Jones Islamic Market Index.
Bonds
Bonds are IOUs issued by big corporations or governments. When you invest in a bond, you essentially lend money to the issuer. In return, the issuer pays the investors regular interest.
These assets are haram because they involve riba (interest). The fixed interest payments violate the principle of earning profits through legitimate trade.
CDs (Certificates of Deposit)
CDs are time deposits offered by banks. You deposit money for a fixed period in exchange for a guaranteed interest rate. Of course, this asset type is haram, as interest accrued is unearned.
Sukuk
Sukuk are Islamic financial certificates similar to bonds. However, they are structured to comply with Shar'iah law. They allow Muslims to own a tangible asset and provide returns derived from profit-sharing. Sukuk are halal because they avoid interest.
Some options for investing in these assets can be done via:
- Wahed: Investing with Wahed provides you with the opportunity to invest in Sukuk. Depending on your risk appetite, we offer a range of portfolios with varying allocations of Sukuk. For instance, conservative investors can expect a significant allocation in Sukuk, while those who choose a moderately aggressive portfolio will have a smaller allocation
- Franklin Global Sukuk Fund: A fund that invests in a fixed- and floating-rate Shar'iah-compliant securities portfolio.
- HSBC Global Sukuk Fund: This provides access to various Sukuk instruments worldwide.
- SP Funds Dow Jones Global Sukuk ETF (SPSK): A Shar'iah-compliant Exchange Traded Fund (ETF) that tracks the returns of the Dow Jones Islamic Market Index.
Savings Accounts
Savings accounts are bank accounts where you can store money and earn interest. They are popular for their security and the interest they generate. Since the interest generated is unearned, it is considered riba and is forbidden in Islam.
Gold
Gold is a precious metal that is used as a store of value. People invest in gold to hedge against inflation or as a haven during economic uncertainty. Investing in gold is halal as long as it is owned outright and not involved in interest-based transactions.
Some options for investing in these assets can be done via:
- Wahed: When you invest with Wahed, you gain access to an asset class that is often hard to reach. The Gold ETF included in our portfolio mirrors the price movements of gold in the spot market, offering returns comparable to that market.
- Physical Gold: Buying gold bars or coins from reputable dealers.
- Gold ETFs: Investing in ETFs like SPDR Gold Shares (GLD) backed by physical gold.
- Gold Mining Stocks: Investing in companies that mine gold, such as Barrick Gold Corporation.
Property
Property investment involves buying real estate to generate rental income or for future appreciation. This asset can provide steady cash flow and long-term growth. Property investment is halal, as owning and leasing it are permissible activities. Notably, it must not be financed with loans involving interest.
Some options for investing in these assets can be done via:
- Wahed: We’ve got something big in store for you, more to come!
- Direct Purchase: You can buy residential or commercial property.
- REITs (Real Estate Investment Trusts): Investing in Shar'iah-compliant REITs that own and manage properties.
Diversify Your Portfolio to give yourself the best chance at higher returns.
Modern Portfolio Theory (MPT) is a framework that emphasizes diversification in investment portfolios1. This theory suggests that users spread investments across different asset classes to reduce risk and maximize returns. Since halal assets perform differently under various market conditions, diversification helps mitigate their inherent volatile nature.
So, where does Wahed come in? We provide individuals access to diversified halal portfolios personalized to their goals and life stages. Our Shar’iah review board rigorously screens all investment options to maintain their integrity, while our investments committee ensures portfolio health and adherence to the strictest Islamic principles.
If you’re ready to get started on your halal investment journey click on the button.. We look forward to having you join our community of over 300,000 in our fight against Riba.
Disclaimers:
* The term 'Halal' denotes that it is permitted and follows Islamic law
Sources:
- https://www.investopedia.com/terms/m/modernportfoliotheory.asp
Risk Warning: Equity investments are not readily realisable and involve risks, including loss of capital, illiquidity, lack of dividends and dilution, and it should be done only as part of a diversified portfolio. Investments of this type are only for investors who understand these risks. You will only be able to invest in the company once you have met our conditions for becoming a registered member.
Please visit www.wahed.com/uk/ventures/risk for our full risk warning.
Risk Warning: As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
Please visit www.wahed.com for our full terms and conditions
Maydan Capital Limited, trading as WahedX, is registered in England and Wales (Company No. 13451691), registered office: 87-89 Baker Street, London, W1U 6RJ, UK. Maydan Capital Ltd (FRN: 963613) is an appointed representative of Wahed Invest Ltd (FRN: 833225), an authorised and regulated firm by the Financial Conduct Authority.Wahed Invest Ltd. is registered in England and Wales (Company No. 10829012), registered office: 87-89 Baker Street, London, W1U 6RJ, UK and is authorised and regulated by the Financial Conduct Authority: FRN 833225.
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
Wahed Invest LLC (Wahed) is a US Securities and Exchange Commission (SEC) registered investment advisor. Wahed Invest provides brokerage services to its clients through its brokerage partner Apex Clearing Corporation, a member of NYSE - FINRA - SIPC and regulated by the SEC and the Commodity Futures Trading Commission. Registration does not imply a certain level of skill or training. Wahed does not intend to offer or solicit anyone to buy or sell securities in jurisdictions where Wahed is not registered or a region where an investment practice like this would be contrary to the laws or regulations. Any returns generated in the past do not guarantee future returns. All securities involve some risk and may result in loss. Any performance displayed in the advertisements or graphics on this site are for illustrative performances only.
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