Is Share Investing Halal or Haram?
Summary
TLDRThis video script discusses the potential of halal stock investing for Muslims, highlighting the FTSE 100's 26% growth despite market volatility. It emphasizes the current economic climate, where governments are injecting funds into the economy, likely benefiting the stock market. The script outlines five key steps to identify halal stocks, including ensuring the business is not haram, the company has a low debt-to-asset ratio, and less than 5% of revenue comes from haram sources. It also suggests using robo-advisors, stock screening apps, or doing thorough research. The speaker offers resources, like a halal stock screening course, to help Muslims invest ethically.
Takeaways
- đ The FTSE 100 has increased by 26% over the last decade, suggesting potential for halal stock investing.
- đ Governments are injecting vast sums into the economy, which could lead to growth in assets like stocks and property.
- đ« Many Muslims avoid stock investing due to misconceptions about it being similar to gambling or involving haram activities.
- â The majority of scholars consider stock investing halal, provided certain criteria are met.
- đ€ Using a robo-advisor or Islamic fund manager is one way to invest in halal stocks without doing the screening yourself.
- đ± There are apps available forćæ„ screening of stocks for their halal compliance, though they may not be fully reliable yet.
- đ Investors should conduct their own due diligence to ensure the stocks they choose meet halal standards.
- đ« The first step in halal stock screening is to ensure the company's business is not haram, such as alcohol, tobacco, or firearms.
- đŒ Ethical considerations are important, including checking for issues like slave labor or environmental harm.
- đ” A company should not have an impermissible level of debt; a threshold of 33% debt to total assets is often used.
- đ Companies should not derive more than 5% of their revenue from haram sources, such as the sale of alcohol or pork.
- đŠ It's important to ensure the company has illiquid assets and is not just a shell company holding cash.
Q & A
How has the Footsie 100 performed over the last decade despite various market conditions?
-Despite various market conditions, including the recent coronavirus pandemic, the Footsie 100 has still increased overall by 26% over the last decade.
Why is now considered a good time for Muslims to explore stock investing in a halal way?
-Now is considered a good time for Muslims to explore halal stock investing because governments around the world are pumping hundreds of billions into the economy, which historically has led to increased investment in assets like stocks and property.
What are the common misconceptions about stock investing being Haram among Muslims?
-Common misconceptions include the belief that stock investing is too similar to gambling, involves too many haram companies, and is associated with interest-bearing loans which are not permissible in Islam.
What does the majority of scholars say about the permissibility of stocks and shares in Islam?
-The majority of scholars have said that stocks and shares are halal, but investors need to follow specific criteria to ensure they are only investing in halal stocks.
What are the three options Muslims have for investing in halal stocks without doing the screening themselves?
-Muslims can invest through a robo-advisor, an Islamic fund manager, or use apps like Zara Islamically and other stock screening apps to find halal stocks.
What are the five steps to ensure a stock is halal according to the video?
-The five steps are: 1) Ensuring the business is not haram, 2) Checking the company is ethical, 3) Ensuring the company has a tolerable level of debt (less than 33% debt to total assets ratio), 4) Making sure the company has no more than 5% of its revenues from haram sources, and 5) Ensuring the company has some illiquid assets.
What is the significance of the 33% debt to total assets ratio in halal investing?
-The 33% debt to total assets ratio is significant because it represents a tolerable level of Haram debt that scholars have determined as permissible for a company to be considered halal for investment.
Why is it important to ensure a company has illiquid assets when considering halal investment?
-It is important to ensure a company has illiquid assets to avoid investing in a shell company that only holds cash, as this would not be in line with Islamic principles which require money for money transactions to be equal.
What resources does Islamic Finance Gurus provide to help Muslims invest in halal stocks?
-Islamic Finance Gurus provides resources such as a halal stock screening course, a halal stock list based on the Footsie 100, and an investment comparison engine to help Muslims invest in halal stocks.
How can Muslims ensure they are investing in halal stocks if they want to do the screening themselves?
-Muslims can ensure they are investing in halal stocks by following the steps outlined in the halal stock screening course provided by Islamic Finance Gurus, which includes a checklist and practical steps for screening stocks.
Outlines
đ Stock Investing in a Halal Way
This paragraph discusses the performance of the FTSE 100 over the last decade, highlighting a 26% increase despite challenging market conditions like the coronavirus pandemic. It emphasizes the importance of Muslims considering halal stock investing, especially with the current economic stimulus by governments worldwide, which is reminiscent of the financial crisis. The speaker suggests that the influx of funds into the economy could lead to a bull market, making it a prime time to invest in stocks and shares. The paragraph also addresses common misconceptions about stock investing being haram and introduces the criteria for identifying halal stocks, such as avoiding companies involved in haram activities, having a permissible level of debt, and ensuring the company's revenue is not majorly derived from haram sources.
đ Steps to Identify Halal Stocks
The second paragraph outlines the five steps to ensure a stock is halal for Muslim investors. The first step is to confirm the business is not involved in haram activities. The second step involves assessing the company's ethical standards, including labor practices and environmental impact. The third step is to check the company's debt level, with a general guideline of no more than 33% debt to total assets ratio being permissible. The fourth step is to ensure less than 5% of the company's revenue comes from haram sources, such as alcohol or pork sales. The final step is to verify the company has illiquid assets to avoid investing in a shell company. The paragraph also mentions resources available to help investors, such as robo-advisors, stock screening apps, and educational courses on halal stock screening.
Mindmap
Keywords
đĄFootsie 100
đĄHalal Investing
đĄFinancial Crisis
đĄRobo Advisor
đĄStock Screening
đĄDebt to Assets Ratio
đĄHaram
đĄEthical Company
đĄRevenue from Haram Sources
đĄIlliquid Assets
Highlights
Despite market volatility, the FTSE 100 has seen a 26% increase over the last decade, suggesting potential for halal investing.
Government economic stimulus post-financial crisis often leads to growth in property and stock markets.
Current global economic policies involve massive injections of funds,éąç€șçè”äș§ä»·ćŒćŻèœäžćïŒć°€ć ¶æŻèĄç„šćèĄä»œă
Many Muslims consider stock investing haram due to its perceived similarity to gambling and involvement with haram companies.
The majority of scholars have deemed stock and share investing halal, provided certain criteria are met.
There is no universally accepted halal stock screening method, leaving investors to rely on Islamic fund managers or apps for initial checks.
Investors should conduct their own research to ensure the stocks they invest in are halal.
The first step in halal stock screening is to ensure the company's business is not haram.
Investors should avoid companies involved in alcohol, tobacco, firearms, adult entertainment, or haram financing.
Secondly, ensure the company is ethical and does not engage in practices like slave labor or cause environmental harm.
Debt levels should be considered, with a maximum of 33% total debt to total assets ratio being permissible.
Companies should not derive more than 5% of their revenues from haram sources, such as the sale of alcohol or pork.
Investors should ensure the company has illiquid assets to avoid investing in a shell company.
Islamic finance gurus offer resources to simplify the process of halal stock screening.
Investors can use a halal stock screening course to learn how to screen stocks effectively.
Islamic finance gurus provide a pre-screened list of FTSE 100 companies to assist investors in making halal choices.
For those who prefer to invest directly in stocks, a halal stock screening course is available to guide the process.
Transcripts
over this last decade we have seen some
of the craziest market conditions heck
we're living through one right now with
coronavirus but in that time did you
know that the footsie 100 has still
increased overall by 26% that is a good
reason for Muslims to look further into
stock investing in a halal way the other
good reason for us to look into this
whole area right now is because there's
a real opportunity on the horizon
because look what happened in the
financial crisis the government they
slashed billions and billions into the
economy and where does all that money
end up it has to end up somewhere and
what happened at that time was it ended
up in property and the stock market and
we saw the biggest bull market in the
stock market for many many decades and
we saw house prices particularly in
London shoot up enormously and right now
what is happening in our economy around
us governments around the world are
pumping literally hundreds and hundreds
of billions into the economy once more
that money has to go somewhere and the
safest place for you to find yourself is
hold assets because assets will be the
things that start appreciating and so
stocks and shares are one key area where
that money will potentially end up in
this video I want to share with you how
you go about picking Halal stocks
because that is a relevant precursor to
you actually entering into the stocks
and shares market and buying stocks as a
Muslim
[Music]
a lot of Muslims think that stocks and
shares is Haram and they say that's
because it's too much like gambling
there's too many haram companies
involved there's too many
interest-bearing loans that are involved
in the whole economy how can we be
investing in something like that there
is actually some truth to all of those
arguments but ultimately the majority of
scholars have said that stocks and
shares is halal but you need to be
following a few set of very key criteria
to pinpoint only the halal stocks and
we're going to dive into that today
unlike meat there's no HMC of stock
screening so what are your options well
the first option is that you could
literally just give your money into a
robo advisor an islamic fund manager and
they'll do it for you the second
approach that you can use is use apps
like zara islamically and other stock
screening apps they're a great first
check in my experience but they're not
as well developed yet to be able to rely
on definitively and the third option is
something that you should always do is
do the check yourself to make sure that
you're really comfortable that they are
halal stocks and we're going to dive
into the five steps you need to take to
make sure a stock is halal step one is
the business haram right this is the
easiest one if you're going to invest in
something that's her arm that's not
allowed if you're confused about whether
a company is haram Mahalo ask them of
thee we've got a forum forum don't
Islamic finance guru calm or we've got
tomb of these on there and you can ask
them and they'll get back to you usually
within a day companies that deal in
alcohol Tobacco Firearms adult
entertainment Haram financing any of
those companies would be impermissible
and you can look and it really is an
obvious decision when it's something
like that the second step that you need
to take is to make sure the company is
actually an ethical company because it's
one thing being halal and selling I
don't know cardboard boxes but it's
another thing being an ethical company
that doesn't have you know slave labor
involved or it doesn't have any other
kind of environmental major kind of
calamities on its hand that sort of
thing just do your check on that usually
large indices have really strong
governance around them and that means
the companies on there typically won't
fall foul of that but do your own
homework the first step is make sure
that the company doesn't have an
impermissible level of debt now there
are some people in the Muslim community
who say that you should not invest in a
company that has any level of debt and
that is you know a fairly respectable
view and we've actually got a zero debt
halal stock list that we've created that
you can access on the website and I'll
share the link below but our view and
the view of the majority of scholars is
that as long as there is only a
tolerable level of Haram debt then that
should be permissible and the reasoning
behind that is because if you have a
situation where come where Muslims can
only invest in zero debt companies that
means that all Muslims will be investing
in a tiny tiny tiny basket of companies
and that means that their investments
are not going to be well managed they
don't really have access to a whole
range of investments it's going to
really limit Muslim investment and
Muslim growth and wealth the total level
of debt that is allowed by scholars such
as at a or I fee and others is 33% total
debt to total assets ratio so if you if
a company has more than that amount of
debt then they would not be permissible
but if they have less than then they
would be fine and the number is an HD
hard it's something that the scholars
have come up with by themselves based on
their understanding of the wider tax in
the wider context however some scholars
do point to a hadith where the Prophet
said Solara Salaam that fool off' is
kafeel a fool took a fear that 1/3 is a
lot and they say that that means that
you should have debt as a maximum at 33%
and they rely on on the hadith the
fourth step is to make sure that the
company that you're picking does it have
more than five percent of its revenues
coming from haram sources what that
means is that for example you've got a
company
such as Tesco that has sources of
revenue that are from Haram sources such
as the sale of alcohol or the sale of
pork you need to make sure that it
doesn't have more than 5% and where
there is any doubt and there may be
because you might not be able to find a
breakdown of that detail then you should
generally seek to avoid that and the
reason for why this 5% threshold is
allowed in the first place is because
every company pretty much will have some
money sat in the bank account or they'll
have some other kind of minor her arm
revenue coming in but if we use that
kind of strict criteria that no harm
revenue should be used then that would
rule out pretty much all companies
across the world and so that's why
scholars allow that and so--but the
fifth and final step is to make sure the
company you're investing in has some in
liquid assets what that means is you're
avoiding a situation where you're buying
a shell company that just holds cash
because then you're going to be buying
let's say a hundred pounds of cash that
there is in this company but you're
going to be buying it at say 95 pounds
or 105 pounds whatever that stock market
price is fluctuating that but that is
not allowed because in Islam money for
money needs to be perfectly equal and
you don't want to be doing that with a
stock market either so just check and
make sure the company has at least some
illiquid assets things like you know
cars inventory intellectual property
anything basically other than cash now I
appreciate that seems like a lot of
steps and some of them quite complicated
to pinpoint a halal investment so what
we've done at Islamic finance gurus
we've created a bunch of resources to
get you started as painlessly as
possible firstly you can just avoid the
pain of having to pick all these stocks
and shares yourself and put all your
money in with a fund manager or Robo
advisor who is going to put your money
into halal stocks and shares and we've
got an investment comparison engine that
lists all the options out that you can
compare between and go for whichever one
you fancy secondly we've actually
created a screen of the footsie 100
companies that lists out exactly which
one of those hundred or so companies is
halal so we've done the hard work for
you and you can just use that and crack
on do actually check
yourself as well if the company's halal
or not because obviously we've done an
initial screen where you should do a
detail screen when you're actually
coming to invest in a particular company
but you might say to me look Ibrahim I
actually really want to invest in stocks
and shares myself rather than have to
rely on anyone else that's fine you need
to be able to stop screen really well
and we used to as a young company we
used to screen stocks for people all the
time when they're sending those requests
to us but now I'll hamdullah is a larger
company we just get so many requests
that wasn't feasible so what we did was
we created a halal stop screening course
that allows you to get the practical
steps that are needed to actually do
this yourself so we've got a checklist
in there where you literally have to
just check off the boxes as you go
through the steps that we've outlined in
the videos that this is what you do you
go into a company's accounts this is the
step that you take this is the step that
you take and eventually you'll be able
to screen a stock in less than 10
minutes in less than five minutes even
once you get practice and if that is of
interest then just click the link below
and check it out please like this video
and hit the subscribe button and hit the
bell notification as well so you hear
about all of our videos first and so
that we can continue making videos like
this for you until next time assalamu
alaikum
Voir Plus de Vidéos Connexes
How Risky Is The Stock Market?
I Invested $5 a Day for 27 Months. Here's What Happened.
Best Stocks to Invest in 2024 - 3 Undervalued Stocks + Breakout, Stocks for Long Term, Stocks to Buy
Best Multibagger Stocks to Invest in #ShareMarket | Fundamental Analysis | How to Select Stocks?
What is halal retailing?
How do investors choose stocks? - Richard Coffin
5.0 / 5 (0 votes)