Halal investments are sought out by many people today; Muslims and non-Muslims alike. What halal investments entail is two things; that the money invested is invested in something that does not cause any kind of social harm and that there is no interest involved in any transaction.
When these two criteria are met, one can proceed to seek put proper sectors to invest money smartly and efficiently and gain substantial returns.
Here are ways you can make halal money while investing smartly:
1. Stock Shares
Stock trading can be a tricky field, but it has some strengths that cannot be denied. Firstly, it allows you diversification; your investments can be placed into different companies of the same trade activities. An example of such would be if you are interested in the world of nutrition; then you could invest portions into different food chains. You can further diversify your investing by diving into different industries as well, like the fashion industry or into furniture. This will assist you in providing your investments with a layer of protection as if for example the food industry should face a drop due to some backlash, then your other investments would still be safe. Additionally, you may diversify your stocks geographically by investing in companies abroad following the volatility of the stock market. For smart investors, stock trading holds the highest potential returns and thus, it would not be a bad idea for you to throw your batter in the mix.
We know that for Muslims, this can get quite tasking due to the fact that companies hold different activities and moral values. Shares of riba-infiltrated and companies dealing with practices such as alcohol, tourism have to be avoided. So, here are a few pointers to better direct you towards halal-investing in stocks:
- Go for halal shares such as clothing, real estate, furniture, etc.
- Take due diligence and time when screening companies in terms of debt levels and market capitalizations. This can be done through individual research by looking into the company’s activities and debt requirements.
- You may refer to suggested online halal stock screening platforms like: Amanie Screening, Wahed Screener and Finispia to identify the company’s compliance if you need further confirmation.
- Avoid short term speculations and make sure when interacting with the stock market that you are investing and not trading for your investments to not become a gamble.
- Always be vigilant of the company’s actions after having invested in it. Should you discover that the company has begun to deal with interest, withdraw your contribution and donate the necessary amount, set by Shariah, to charity.
2. Real Estate
Investing in real estate has always led the list of recommended investment options. It is notable for its stability and tangibility; it is something that you can witness, touch and be as involved in as you wish. Additionally, it has the potential to generate steady income for time to come.
If you’re looking to join this type of investment and you already possess the funds to do so, then you are looking at either residential properties or commercial properties. Residential properties could be used to generate recurring and duration-based profit through the renting of houses and apartments while commercial properties will include the construction of service based-projects like stores, malls, hotels which would typically require intense long term planning and wider perspective of the prospects of the businesses.
Another method of making profit in real estate is buying property for capital gain. In this regard, it is important to look into the property’s potential and the current possibility and duration of tenancy.
You may ask: what happens then if I wanted to invest in real estate but I am not quite there yet financially?
If you don’t have the funds to invest in the field, then crowdfunding is for you. It gives you the option of joining funds with a pool of investors towards the construction or purchasing of the property. Once the properties are sold you will receive your share of the profit which you may direct into another investments to keep you investment status active.
3.Sukuk (Islamic Bonds)
Sukuk are known and generally referred to as Halal bonds. If you are interested or surrounded by flourishing projects or businesses that you wish to take part in, then Sukuk are for you. They will serve you in balancing and further diversifying your portfolio and giving you part-ownership to assets or businesses that are in line with your interests.
If you are interested, all you have to do is find a tangible asset, a project, a business or a venture that offers Sukuk investments, do your due research with regards to its activities to ensure that it is compliant to Shariah then invest. The profit that you will recieve is completely based on the performance of the asset or business, so you want to make sure that you choose wisely.
It is important to keep in mind that Sukuk are not bonds which means that a pre-decided interest is out of the question.
4.Venture Capital Firms
Investing in venture capital firms means that you have passed the first stages of investment and quite know what you are doing at this stage as they require high risk financial portfolios. Venture capitals are platforms funding a diversity of projects and so you would want to get acquainted with the firm that you are planning to put your savings in. A great attribute of investing in venture capital is the endless possibilities of reach as per the diversity in start-up or companies that venture firms finance.
As an investor, you are indirectly, involved in financing a range of projects financed by the venture firm. This is quite exciting as you are taking part in a great range of projects in a very limited time. However, in order to make sure that your investment remains halal, you need to be constantly and consistently aware of the activities not only within the firm but within the projects running as well to ensure their Shariah compliance.
5.Assets of Intrinsic Value
Intrinsic value assets are the most flexible, personal and perdurable of investments. They include objects of inbred value like jewelry, artwork, collectibles and precious metals. This type of investment requires a good eye, a sound mind and a lot of patience. So if you are looking for quick profits, then this isn’t the investment for you. On the other hand, if you are at your leisure in investing, then feel free to tap into and enjoy this one.
Investing in assets stands out from other investments in its enjoyability; unlike other investments where you are dealing with profit in money form, art, collectibles and jewelry require your personal inclinations and taste.
Gold stands as one of the main assets invested in consciously and unconsciously. Time is kinder to gold than it is to currencies; in other words, the worth of $50 in the 90s is not exactly what it’s worth today but a piece of jewelry from the last decade still holds its value. This means that gold investments can serve you in preserving your wealth. Essentially, any jewelry that you may already have is intrinsically an investment to you without you knowing it. The best bit is that you can wear the gold until such a time comes when you wish to trade it in and it would still maintain worth. Ken Alstad said “Second-hand gold is as good as new” and this statement pretty much sums it up.
Currently , gold investments also come in the form of manufactured gold coins which are purchased along with a purchasing slip; they are easily purchasable and available online on a multitude of platforms. So if you want to invest in gold, this is your time to shine. [no pun intended]
In conclusion, going halal in terms of investing does not necessarily limit you. There is still substantial possibilities for you to be an active investor and make halal money.
Umar Munshi is the Co-founder of Ethis Global, an emerging group of ethical crowdfunding and fintech companies licensed in various jurisdictions. Starting in Singapore in 2014, Ethis.co is now present in Malaysia, Indonesia and Dubai where it serves small and large investors to match them to projects with healthy profits. Umar is a guest author on Halalop.