The Four Principles Of Investing That Millions Are Following Around The World

Wahed Editors

 

Shariah law covers everything from dietary restrictions to the building of communities, and everything in between. So, it should be no surprise that they also extend to the realm of finance.

Islamic investing, which is often referred to as “Shariah-Compliant Investing,” is a financial strategy in direct alignment with Islamic law. In Shariah Compliant investing, certain types of investments are restricted as a result of it’s four main principles.

 

Avoiding the payment and receipt of interest

There is an Islamic belief that money holds no intrinsic value. Instead, it should only be used as a medium of exchange, store of value, or unit of measurement. Therefore, attempting to charge or collect “Ribâ” (interest) would display a belief that money in and of itself is valuable, making it prohibited.

 

Investing ethically and morally

Many things which are prevalent in today’s culture, such as gambling, tobacco, adult materials, and alcohol, are outright forbidden by Islamic law. Therefore, one cannot gain any benefit from these forbidden things, which extends to the realm of investing. Gaining monetary benefit from an investment in something like alcohol or tobacco goes against Islamic principles, which tend to promote strong morality and ethics for society at large.

 

Avoiding uncertainty

The laws of Islam are quite stringent on treating all parties fairly in a business transaction. Everyone participating in a financial transaction must be adequately aware of all information, such as price or quantity, which must be clearly determined at the outset of any transaction. Investments which hide vital information or financial details from any party are restricted, as are those which are based on future outcomes which are uncertain for any party involved. This rules out speculative investment vehicles such as options and futures which are seen as having significant ambiguity and/or uncertainty.

 

Avoiding speculation

Many investors seek out speculative investments in hopes of significant returns. However, this does not align with the laws of Islam, which advise investors to steer clear of speculative investments. This relates to the outright prohibition against gambling in Islamic law, but in finance it’s used to forbid investments in highly speculative assets where wealth is obtained by chance, and not by direct effort. Speculation is seen as leaving financial outcomes to chance, which is viewed as a form of gambling under Islamic law.

 

Islamic investing today

Today, there are a variety of tools and resources available to those looking to invest according to Islamic law. Wahed Invest is an automated investing tool for investors looking to comply with Islamic investing laws. Wahed uses an ethical review board which screens all potential investments to determine their viability based on Islamic law. Investors make a deposit and note their risk level, and Wahed automatically invests in a diversified Shariah-compliant portfolio. In this way, resources such as Wahed allow Islamic investors to earn profits in a way that is directly in line with their religious beliefs.

Disclaimer

6 Comments

  • Akbar Imran Butt

    what about investing in prize bonds

    • Wahed Editors

      Hello Akbar,

      We do not invest in prize bonds.

      To know what we invest in, you may visit our website and go to our PORTFOLIO page. For any further questions, feel free to email us at [email protected], thank you!

  • Aisha Waheed

    Thank you every Muslim needs this in their portfolio, if they have one and in their hands before they start investing. This should certainly be a part of all Math and business classes in Islamic Schools and Institutions. Keep up the good work!

  • Jamil

    Jazakallah khair

  • Khandker Sabbir Hasan(Radif)

    Hello I used to work in a bank but now I have changed my ccareer to work as a stock broker which is halal.I have got some clients who are in search of loan.would that be halal if I arrange those clients loan from the banks for a broker fee?

  • Dr Nisar Pathan

    How do I get this journal. ??

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