tired of trying to invest in halal stocks by yourself there are tons of guides on investing in stocks but almost none of them tell you if they're actually halal to invest in you might have watched hours of videos read countless articles and still be unsure if you're putting your money into something that's truly permissible and I get it most guys skip the Islamic finance rules or make it way more complicated than it needs to be but don't worry it's not your fault no one actually shows you the real way to invest in halal stocks while keeping things 100% halal but I'm not going to gatekeep in this video I'll walk you through a step-by-step process so you can invest in halal stocks confidently without wasting hours on research and making sure everything you invest in is in line with our Islamic principles but before we get into that let's talk about the wrong way to invest in halal stocks i first started investing at the age of 17 and had a limited understanding of halal investing i thought so long as I wasn't investing in any companies that were selling pork or alcohol I was pretty much safe and I think a big assumption here is that investing in any tech company or any healthcare company is halal to invest in and that they're automatically halal and that's all you need to know another big mistake a lot of investors make is that they're not sure why a stock is halal or haram it's really important to dive in and understand why a stock is halal or haram which will help you make a better investment decision knowing this will help you really understand why you're investing in this company and what makes it halal the next mistake many investors make is investing into a stock just because someone online says it's halal or whether it's on Reddit or Twitter just because someone online says it's halal doesn't necessarily mean it's halal it's important to do your own due diligence and check whether or not there's Sharia compliance backing it and the final mistake many investors make is ignoring financial ratios and doing your own due diligence on the company the most important rule is just because an investment is halal doesn't necessarily mean it's a good investment and if you invest in this way you could end up putting your money into stocks that aren't truly halal which defeats the whole point of investing Islamically but don't worry there's a right way to do this step one understanding what makes a stock halal before we look at investing in stocks it's important to understand the criteria and the guidelines to understand what makes a stock halal or haram you see in the Quran and Hadith there's not explicit rulings on how to invest in the stock market modern day scholars recognize that this would be a problem as Muslims today would be at a disadvantage when it comes to building wealth without the tools to properly navigate the stock market which inevitably contains portions of interest and other non-Islamic activities and so scholars have come up with a framework that allows us to invest in line with Islamic finance principles and these are called the Sharia standards the screening is split into two we have the business screening and the financial screening the business screening requires that a company's core activities shouldn't be involved in haram activities for example we avoid companies that are in industries like pork and alcohol the second part of the screening process is the financial screening the first part is the 5% threshold rule which dictates that a company can't earn more than 5% of its revenue from impermissible sources you see scholars have taken a look at the stock market and have found that it's very difficult to find a company that earns 100% of its revenue from permissible sources for example you can have a large tech company where its core business activities are permissible however it may have a small chunk of its cash in an interest savings account so what the ruling states is that it can't earn more than 5% of its revenue from these impermissible sources it's important to note that the impermissible revenue will have to be purified which we'll be touching on later in this video the next big financial criteria is the company's debt according to the majority of Sharia standards a company can't hold more than 30% debt let's say for example you wanted to go through the manual approach of screening for a halal stock how you would do that let's look at Microsoft for an example you can search up here Microsoft annual report click on this website here um and then you just scroll down you know find the latest annual report um I've just jumped here to uh the income statements of the financial data on the company you can see here all of their financials including uh their balance sheet so you can see you know what the assets are what their liabilities are um you know what the total debt is for the company things like that you'll find all of that information on the annual report if you want to screen manually but you want an easier way to look through multiple different companies you can use a platform like Yahoo Finance you know you search up the stock here in this case we've searched up Microsoft again you flick down here to financials and you can see all of the same information so you can see the income statement you can see what income they've earned you can see the same things so you can see the interest income which would be the haram portion of the revenue and you can see the balance sheet with the same uh information as the annual report such as the debt the assets liabilities things like that it's just an easier method of manually screening through socks what I like to do is then put these numbers on a spreadsheet and just make sure they're below for example the revenue is below 5% the debt is below 30% um and then just make sure all of those financials are reached so that they meet Sharia compliance for the standard I'm looking at the second step is finding halal stocks when I started my halal investing journey the only way to check for halal stocks was to manually check through annual reports just to make sure that it met the criteria which meant that I had to look through a bunch of financial reports just to find out where the company's revenue was earned and whether or not its debt was below the 30% but now there's a much easier way to find halal stocks instead of checking manually through each company you can use a halal stock screening app to help simplify the entire process there's a bunch of different apps that are available on the market but one I do recommend is Muslim Exchange how it works is once you've downloaded the app you can search up the stock that you want to check and it will tell you whether or not it's halal the cool thing about the Muslim Exchange app is that it screens five different Sharia standards so it'll tell you exactly which Sharia standard it passes here is an example of how to use Muslim Exchange which is a halal stock screening app that screens five different Sharia compliance standards so let's take a look here what you have to do this is the Muslim Exchange website you know once you've signed up um you can search up um a specific stock let's say for example we're looking at Apple let's search up Apple okay so this is the Apple stock you click on that okay so we can see here um on the hal stock screen out we can see Apple we can see the name of the company uh what the ticker is whether or not it's compliant in this case it is um the price of the stock um some information some you know the overview market cap things like that you know you can see financial performance analyst forecast some news about Apple its earnings you know who the CEO is a description of the company things like that um okay but the important thing is here is the compliance so let's have a look so we can see here Apple is Sharia compliant it passes three out of five of the Sharia standards that Muslim exchange screens against they screen for AOP the S&P DJI Footsie and MSCI we can see here it's passed AOE S&P DJI um and has failed the other two we can flick through here it can it tells you uh here S&P tells you you know what the debt is what the requirements to pass S&P is and whether or not it passes it you can see here it fails on the cash and accounts receivable and similar with the MSCI it tells you here you know 2.5% of impure income from Apple that it earns uh the purification that you need and the zakat so it's it's a really easy way to look through and screen for halal stocks without having to manually go through each individual stock look at their annual reports look at their financials see whether or not it passes compliance this is a really easy way to sort of see that you can even see here the financials of the company how they've been doing uh you know what the forecast is um you know the analyst concerns here is to buy Apple stock um just some information about the stock in general which is pretty handy when deciding whether or not to invest in that stock so the first point would be to look at whether or not it's halal in this case Apple is compliant for three out of five of the different SH standards then whether or not it's a good investment you know as we mentioned earlier just because an investment is halal doesn't necessarily mean it's a good investment i think an important thing to note here is with the compliance for example it says here it passes three out of five of the Sharia standards does it need to pass all five no not necessarily um in fact it only needs to pass one all of these Sharia standards there are only slight variations between them and they account for slightly different factors each individual standard has been approved by Islamic Finance Scholar so it doesn't necessarily need to pass all five compliance standards so long as it passes one it is Sharia compliant however if you're more comfortable with a specific Sharia standard you may want to look out for that one for example a lot of people are familiar with the AO standards and only invest in halal stocks that pass the AO standards however all of these Sharia standards are usable and it just really needs to pass one i think the big difference between manually screening halal stocks and using a halal stocks reading app is keeping up with the change in compliance a very useful feature of halal stocks reading apps is the ability to notify you when there is a change in compliance if you are doing this manually although it may technically be more thorough if you know how to do it you have to sort of set reminders every quarter just to keep updated with the latest compliance whereas a halal stock screening app no matter which one you use will likely notify you when there is a change in compliance which just makes the process easier um they have algorithms that they run making sure they have the latest financials on you know the different companies and it just makes the process a lot easier when it comes to managing your Sharia compliance with your stocks that you invest in the other way you can check for halal stocks is to use a halal ETF so when it comes to investing in the stock market you have individual stocks where you're investing in an individual company and you also have ETFs an ETF allows you to invest in a variety of stocks usually across different sectors the benefit is that it allows you to invest in a diverse range of stocks without having to manually invest in each individual company and at a much lower cost so in the halal investing world there are a bunch of different halal ETFs available on the market so what you can do is look up their holdings and see which companies they've got invested in their ETF you can then choose those individual stocks and invest in those knowing that they're Sharia compliant to invest in alternatively you can invest directly in the Halal ETF what you do is for example let's look at the HLA ETF which is on the Wahed website so I'm on the Wah website here i'm on the specific uh ETF you scroll down here to holdings which I've clicked on here and you can see all the different holdings that the Halal ETF holds all of these stocks would be Sharia compliant as they're part of the halal ETF just got to make sure that it's updated to the latest quarter you can see here 24th of February 2025 so it's pretty updated there so all of these stocks on the ETF would be Sharia compliant to invest in um and you can see specifically how much this ETF what weightings of all the different stocks it's holding so this is another really easy way to look at a halal ETF look at its holdings and see which stocks are halal to invest in you can manually invest in all of these stocks or some of these stocks and the benefit of obviously going directly with the ETF is that when there's a change in compliance again they'll manage that they'll rebalance it based on what's happening in the market and it's also an easy way to invest in all of these companies without having to manually add them to your investment pie so now you know how to buy halal stocks the next step is to actually start investing so the first part of that process is finding an investment platform or an investment brokerage to invest with i get this question a lot how do I decide which investment platform to go with so instead of recommending a specific platform how I would go about this is to look at a few different factors the first one would be fees so some platforms charge you a fee to buy and sell shares so for example if you're buying and selling frequently this may be a factor you want to consider because if there are high fees they'll likely eat into your profits long term another fee some platforms charge is a withdrawal fee so for example once you've sold your shares and you've made your profit and you want to withdraw that to your bank account some platforms charge you a fee to make that withdrawal you also have management fees so depending on the investments that you're investing in some platforms also charge you a management fee to manage those investments and finally you have subscription fees so some platforms instead of charging you fees when you buy and sell shares they charge you a subscription fee so it's a monthly fee that goes out which allows you to use their platform so depending on the style of investing you're doing how often you're investing these different fees may affect your investments the second factor is account minimums so some platforms have a minimum amount you need to invest with them before you can use their platform for example some platforms have a $100 minimum investment fee the third factor is the type of investment options available so for example I'm based in New Zealand and I want to access the US investment market does the platform I want to use allow me to invest in US stocks and then the next question is do they have the halal ETFs or the halal stocks that I want to invest in on their platform so it could be the type of investment the type of market or the specific halal investment you want to invest in does the platform that you want to go with have those options and the final factor I like to consider are the features of the investment platform for example does it allow you to make fractional investments let's say the stock you want to invest in is currently trading at $500 but you don't currently have $500 to invest in that entire stock does the platform allow you to buy $5 worth of that stock most platforms nowadays allow you to invest in fractional shares however some don't so this may be something you want to look at when choosing an investment platform another super important feature are auto investments so this is something I preach when it comes to investing is automating that entire investment process does the platform you want to use allow you to automatically invest the money you have in their account into the investments you want to invest in and if this is something important to you then you definitely want to make sure the platform you go with has this option and another really cool feature that some platforms have are PI investments where they allow you to set up your portfolio and they allow you to continue to invest in those specific investments on a regular basis when it comes to investing you have the option of either doing it yourself or going with a robo adviser and automating that entire process for you with DIY investing you're manually choosing your investments and you are in charge of then rebalancing making sure the compliance is up to date and making sure your investments are in line with your risk profile it typically requires more work but is also typically cheaper than going with the next option so with the robo adviser approach all you have to do is determine your investment goals decide how much you want to invest and let the robot adviser know what your risk profile is whether you want to be investing in riskier stocks or less riskier stocks and the robot adviser will take care of the rest when it comes to managing your investments that's choosing them rebalancing them making sure they stay in line with your risk profile and for that service they charge you a convenience fee to manage your investments so a few examples of investment platforms you can manually invest with are Interactive Brokers Free Trade Public Robin Hood and there are a bunch of different other ones that you can also invest with depending on where you're located in the world and a few examples of halal robot advisers are Wahid and Wealth Simple and Sarwa's halal portfolios a lot of people I talk to about halal investing are very interested in the idea of getting started however they find the process of actually making the investment intimidating so let's walk you through an example of how to invest with a platform that I use called Sherzies so this is the web version of the app so as you can see here we have the portfolio uh the explore option where you can search up different investments the wallet where money is held ready for investing and then a few other things there so let's search up a stock so let's say for example we've already searched up Microsoft and we can see that it's halal to invest in we've already determined that it's a good investment and that we want to invest in it what does that process look like so once we clicked on it we can see here the name of the company Microsoft Corporation MSFT which is the ticker for the stock NASDAQ which is the stock exchange it's currently trading on $44 which is the current price of Microsoft bit of information here a chart you can see of the price over the past year of what Microsoft has done the one-year low the one- year high the pricing the change over the year you can see the dividend year that Microsoft pays out the PE ratio market cap the fees with this specific platform and the risk level of this specific stock according to this investment platform so let's say we want to buy $10 worth of Microsoft how do we do that so the first thing we do here is click on the big buy button and now it's asking me here whether I want to do a market buy or a limit buy so let's let's briefly talk about the difference between a market buy and a limit buy so a market buy allows you to buy the stock at the price it's currently trading at in this case $44 so I want to buy $10 worth of Microsoft today so I'll be buying Microsoft at the $44 trading price a limit buy allows you to buy the stock at a specific price that you set it at for example Microsoft is currently trading at $44 but you think or you believe over the next week or maybe over the next 30 days the price of Microsoft will drop to $395 what you can do here is you can click on limit buy uh let's go to next you can set the highest price to pay for the share so we're saying that we believe that Microsoft will drop to $395 so you can set a limit by where it will wait till Microsoft drops to $395 and then buy shares of the company if in 30 days Microsoft doesn't drop to that value the order will automatically cancel however if it does reach $395 or below then the order will execute so those are the main differences between a market buy and a limit buy a market buy allows you to buy the stock today at whatever price it's currently trading at a limit buy allows you to wait for the price to reach a certain point so let's say for this example we're going to be going with a market buy so click on next and we say we want to buy $10 worth of Microsoft so click on review so it shows here the amount that we're investing which is $10 the fees in this case is zero we're converting here from New Zealand dollars and that's why there's a conversion fee here and then it just sort of gives you some more information there and then you hit buy it's placing the order and then as soon as the US stock market opens the order will execute and that's pretty much the process of investing in a stock it's very very straightforward once you know how much you want to invest and what you're investing in you just sort of hit buy review the fees make sure you're happy with that and then you can invest there so the next part of halal investing is a super important step which a lot of people forget which is purifying your investment so we talked about this briefly earlier so when it comes to the financial criteria for halal investments there is a 5% tolerance for the revenue which allows you to invest in companies that earn below 5% of impermissible revenue however it's important to note that this 5% or up to the 5% has to be purified in order for it to meet Sharia compliance so let's talk about the different options when it comes to purification so let's say for example you've been investing for a while and you've just realized you're investing in haram stocks what do you do and how do you purify that let's say you've invested $100 into a stock that is now worth $150 what do you do the first thing you'd have to do is sell your investment and give away the $50 in charity and then the next option is if you've invested in halal stocks do you still need to purify your investments the answer is yes so there are two ways you make money from investments the first one is capital gains which is the increase in profit you make on an investment so basically how much you sell it for minus how much you buy it for and if there's a profit which is basically for example if you bought a stock for $50 and it's now worth $200 you made a $150 in capital gains and then the other way you make money from investments is through the dividend which is a small portion of profits that the company give out to its investors for holding their stock so when it comes to purification there's a difference of opinion when it comes to purifying the capital gains but there's a consensus that the dividend income needs to be purified if you want to be more conservative you can purify the capital gains too however capital gains are an increase in market value of the company and not a direct link to the source of the revenue so how do you work out how much you need to give away so we've talked about the impermissible revenue threshold which is below 5% if you're using a halal stock screening app they'll likely tell you what amount you need to purify or at least they'll certainly tell you what percentage of the revenue is impermissible let's say for example you have a company that earns 3% of its revenue from haram sources and let's say they pay annual dividends of $10 you would then have to give away 30 cents annually to purify your investment if for some reason you're not sure what percentage of the company's revenue is haram you can use 5% as that's the maximum threshold a company that is Sharia compliant is allowed to have so you can use the 5% and purify the dividend by the 5% let's talk briefly about a change in compliance and what you need to do if a company that you invest in is initially halal and then becomes haram what do you do so there are a few different opinions when it comes to this and how you can go about what you need to do if there is a change in compliance the first opinion says that you can wait a quarter or 90 days to see whether or not that company returns back to Sharia compliant so let's say for example you've invested in a stock that's halal which then becomes non-compliant you can wait about a quarter to see if the company returns to compliance and if it does you can then continue investing in it but if it doesn't change back to compliant then you would then have to sell your investment and give away the profit as it's no longer a halal stock to invest in the second option is to sell it immediately and then give away the profits my personal opinion when it comes to a stock that's changed compliance comes down to the reason why it has for example has it changed compliance because of the financial criteria let's say the debt percentage has gone up by 2% there's a good chance that it'll likely return back to compliance within a quarter but if the reason the stock is no longer compliant is because of business activities for example if you have a tech company that most of its core businesses are permissible but they then introduce music as a product there's not likely a chance that they'll stop selling music in the next quarter so in that scenario you may want to consider just selling the investment as the revenue of the impermissible source will likely increase over the quarter there's also then the question of what happens if you're making a loss on an investment and the compliance changes and you don't believe the stock will return back to compliance what do you do so say for example you bought a stock at $100 it's now worth $50 you don't believe the stock will return to compliance what do you do so a disclaimer I'm not an Islamic finance scholar but from what I have heard and the opinion I sort of understand is that you are allowed to wait for the stock to return back to the original price you bought it at and then sell the investment so you're not allowed to make a profit on an investment that's no longer compliant but you can recoup the losses that you made from the investment however if you feel that the stock is not going to return back to the price you initially bought it at it might just be best to cut your losses and sell the investment you should now have the tools to invest in stocks in a halal way confidently all the way from finding halal investments setting up an investment brokerage and purifying your investments but of course picking halal stocks is just one part of the puzzle if you want to build a fully halal investment portfolio you will also need to know how to create an investment plan that aligns with your financial goals how to diversify your portfolio the halal way how to invest in halal ETFs and mutual funds and how to grow your wealth whilst minimizing risk and that's exactly what we cover in the Halal Investing Academy your step-by-step road map to building wealth in a way that's 100% halal tailored specifically to Muslim investors click the first link in the description right now to join