Overview
This lecture explains how to confidently invest in halal (Sharia-compliant) stocks, covering the criteria, tools, and practical steps, as well as how to monitor, purify, and manage your investments according to Islamic finance principles.
Common Mistakes in Halal Investing
- Avoid assuming all tech or healthcare stocks are halal without checking.
- Don't rely solely on online claims; always verify Sharia compliance.
- Ensure you understand why a stock is halal or haram.
- Remember, a halal stock isn't always a good investment—check financial health too.
Criteria for Halal Stocks
- Halal stocks must not be involved in haram (forbidden) activities like alcohol, pork, gambling, or conventional finance.
- Business screening: The company's main activities must be permissible.
- Financial screening: No more than 5% of revenue from haram sources; company debt must not exceed 30% of assets.
- Any impermissible revenue must be purified by donating the equivalent amount to charity.
Methods for Finding Halal Stocks
- Manual method: Review annual reports or financial data for business activities and ratios.
- Simplified method: Use halal stock screening apps like Muslim Exchange, which checks multiple Sharia standards.
- Halal ETFs: Invest directly in halal ETFs or look at their holdings to pick compliant stocks.
Choosing an Investment Platform
- Compare fees (trading, withdrawal, management, or subscription).
- Check account minimum requirements.
- Ensure the platform offers access to desired markets and halal investment options.
- Consider features like fractional shares, auto-investment, and portfolio management.
Investment Process Example
- Search for the stock, verify Sharia compliance, and assess if it’s a good investment.
- Decide between a market buy (current price) and a limit buy (specific future price).
- Enter investment amount, review fees, confirm purchase.
Purifying Investments
- Purify dividends by donating the same percentage as impermissible revenue (e.g., 3% of dividend if 3% revenue is haram).
- If unsure, use the maximum threshold of 5% for purification.
- If a stock becomes non-compliant, either sell within a quarter or immediately, donating any profits.
- If selling at a loss, you may wait to break even before selling.
Key Terms & Definitions
- Halal — Permissible according to Islamic law.
- Sharia compliance — Meeting Islamic legal and ethical standards.
- Business screening — Checking if company activities are allowed in Islam.
- Financial screening — Ensuring financial ratios (debt, haram revenue) meet Sharia standards.
- Purification — Donating income from impermissible sources to charity.
- ETF (Exchange-Traded Fund) — Investment fund traded on stock exchanges, often diversified.
Action Items / Next Steps
- Use a halal screening app or check ETFs for compliant stocks.
- Choose an investment platform that meets your needs and offers halal options.
- Purify all investment gains as needed.
- Continue learning about building a diversified halal investment portfolio.