Best Halal Investment Options (2024) Halal Ideas to Invest Money

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The best halal investment options are Stocks, ETF funds, currencies and crypto, precious metals, sukuk (also known as Islamic bonds), and real estate.

Searching for halal investment options that comply with Sharia law without compromising returns is a balancing act for many devout Muslim investors. Where does one draw the line between prudent profit-seeking and riba, the curse of usury? Which asset classes offer growth potential without ties to industries like alcohol, pork or gambling deemed haram? In this guide, we'll cut through the confusion over what's permissible according to Islamic finance principles and highlight some of the most viable halal options for building wealth over time. From stocks and funds to real estate, sukuk bonds and beyond, we'll explore opportunities that respect faith while maximizing returns. By understanding these alternatives, you'll be well-positioned to invest in accordance with your beliefs and long-term financial goals.

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  • Can Muslims invest in the stock market?

    Yes, investing in stocks of companies not involved in haram activities and ensuring the company's revenues are halal is permissible.

  • Can Muslims short stocks in a halal manner?

    Most scholars agree shorting goes against Islamic principles due to speculation and potential harm, so it's generally not considered halal.

  • Are halal savings accounts available?

    Yes some Islamic banks provide halal savings accounts that distribute returns based on actual bank profits vs interest.

  • Are mutual funds halal?

    Mutual funds need screening to ensure they avoid interest and invest only in Sharia-compliant businesses and sectors.

Rules for halal investing

Halal investing refers to the practice of investing following Islamic principles. This means not investing in businesses and activities that are engaged in alcohol, gambling, and pork, or otherwise not in compliance with the law. It also involves avoiding interest-bearing instruments, as well as analyzing a company's revenues and debt levels before investing.

One of the most important rules of halal investing is to avoid companies whose profits come from haram activities such as certain controversial industries, like tobacco and weapons manufacturing. Additionally, interest-bearing instruments such as traditional bonds are not permissible for investment.

Muslim investors may not invest in haram industries or instruments, as stated, but they also must evaluate a company's finances before investing. This includes looking at their balance sheet and profit-and-loss statements to make sure that their money comes from halal sources, and that the company is not courting bankruptcy. So, businesses with high levels of debt must also be avoided, as there is a general guideline that a company should not have more than 33% of debt compared to its assets.

Overall, the goal of halal investing is not only proper financial gain but also to align the investments of Muslims with the beliefs and values of Islam. For Muslims, this means avoiding haram industries and activities and investing responsibly and morally.

Best halal investment options

Below is a list of halal investments through which you can earn profits.

Stocks

Muslims should invest in stocks of businesses that aren't engaged in haram activities. If stocks are involved in activities that are prohibited by Islam, investing in them will be deemed haram. Investing in businesses that make money through interest is haram, but buying stock in a business may be halal if you will only own a small piece of the company and get a small piece of the profits.

ETF funds

ETFs and index funds are also good investments that can help you make the most money. This is because these funds invest in a group of stocks comprising an index, such as the S&P 500. Additionally, the risk is spread out because the equities in the fund are diversified, which is under Shariah guidelines.

Forex trading

Swaps are haram in Islam, and therefore, Forex trading must be done through a swap-free account to be halal. The key is to trade with a reputable broker that offers a swap-free account and to follow the Islamic principles of investing. Please read TU’s complete review of the top swap-free Forex brokers if you want to learn more about swap-free accounts.

Is Forex Trading Halal or Haram?

Cryptocurrencies

Cryptocurrencies are a new form of investment that has recently expanded. It is a controversial type of investment that is the subject of numerous debates. However, some cryptocurrencies are Shariah-compliant, and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has approved them. The cryptocurrency rules are the same as those for the Islamic Forex market; that is, trades should be held on the same day, and no interest should be involved.

Is Crypto Trading Halal or Haram?

Precious metals

Investing in metals such as gold and silver is also halal. These are also considered safe investments for Muslims, as speculation is not involved and they have a fixed value. However, different schools of thought should be considered. According to some scholars, only gold is a permissible investment, and the rest are haram, as there might be speculation involved in those investments.

Sukuk

Sukuk are also known as Islamic bonds. They are the same as traditional bonds, except they do not carry earn interest, thus making them a halal instrument in which to invest. The income generated through Sukuk is in accordance with Shariah.

Real estate

A lot of research with your Islamic scholar is required before investing in real estate because of the amount of interest involved in most properties. There is interest in mortgages as banks ask for them, and there are mortgage real estate investment trusts where investors earn profits through price changes by charging interest on them. However, Real estate investment trusts (REITs) without mortgages are halal.

Some scholars say that a property used for haram things like gambling, making alcohol, or making tobacco products will be seen as a haram investment. Some scholars say a property bought on credit is haram, whereas one bought on lease is halal. Your Islamic scholar can help you figure out how to invest in real estate properly.

What investments are haram?

Stocks in companies that do things that Islamic law says are wrong are called haram. These include stocks in the alcohol, tourism, hotel, nightclub, and pornography industries, banks that are involved in taking or holding interest-based instruments, and insurance companies. Investments in traditional bonds are also considered haram due to the interest involved.

How Halal Investing Can Help Build Wealth

Halal investing, grounded in the ethical principles of Islam, presents an invaluable strategy for not only adhering to religious doctrines but also for accruing substantial wealth over time. It opens up pathways for sustainable, morally-aligned, and diversified portfolio growth, transforming the way we perceive wealth generation. Here's how Halal investing contributes to the building of wealth:

Ethical Alignment

By strictly aligning investments with ethical values, halal investing provides investors peace of mind and a sense of integrity. It transcends beyond pure financial returns and into a realm where every investment dollar contributes positively to society. This alignment often leads to support for businesses that are sustainable, responsible, and value-creating in the long run, paving the way for steady wealth accumulation.

Diversification

Halal investing encourages diversification by spreading the investment across different halal-compliant sectors and asset classes. By reducing dependence on a single income stream, it helps spread the investment risk and can potentially lead to more stable long-term returns, an essential factor in building wealth.

Long-Term Perspective

Investing nurtures a long-term perspective, focusing on wealth accumulation over an extended period rather than seeking quick, speculative gains. It harnesses the power of compounding returns and the element of time, which are crucial for building substantial wealth. This long-term view discourages risky, short-term speculative behaviors, promoting financial stability and growth.

Stability and Sustainability

Halal investing promotes stability and sustainability, as the investments are in businesses that avoid excessive risk. These businesses are often less prone to the volatility common in conventional investments, offering steady, sustainable returns over time, thereby contributing to long-term wealth creation.

Social Impact

Investing in halal-compliant businesses often supports companies that prioritize social responsibility and community welfare. These investments generate good returns over time, aligning with the growing global trend towards ethical and responsible investments, and contributing to the sustainable building of wealth.

Best Islamic (swap-free) accounts

You can hold your position in the Forex market overnight through a swap-free account without paying interest. Below is a list of Islamic swap-free accounts for you to conduct trades:

RoboForex Swap-Free Account

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RoboForex offers a swap-free account for Islamic traders abiding by Sharia principles. The account presents a robust portfolio of investment opportunities, covering Forex, commodities, indices, stocks, and cryptocurrencies. RoboForex emphasizes providing comprehensive educational resources, supporting traders in enhancing their financial literacy. A unique aspect is their automated trading platform, which allows traders to employ pre-established trading strategies. Be aware, trading involves risk and requires cautious management of your capital. For Muslim investors seeking a blend of automation and range, RoboForex is a solid choice.

XM Islamic account

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77.74% of retail investor accounts lose money when trading CFDs with this provider.

The Cyprus-based company XM offers swap-free accounts, which are especially useful for Muslim traders. There are no swap charges or interest charges involved in this Islamic account. You will have to register for a live account through the website of XM and choose the Islami account. A minimum of $5 is required for you to start trading. You can get a leverage of 1:888, which means you can control more money through small deposits, but it is a double-edged sword, because it can also result in greater losses. You can trade Forex, CFDs, energies, and precious metals through your XM Islamic account.

AvaTrade

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Your capital is at risk.
71% of retail investor accounts lose money when trading CFDs with this provider.

Before you start trading Forex, you can use AvaTrade to get access to a lot of learning and training materials. However, this type of swap-free account is not just limited to Forex. You can also trade other assets such as commodities, indices, stocks, and cryptocurrencies. You can also choose from different kinds of accounts, like standard accounts, mini accounts, and VIP accounts.

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