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This article was first published in Islamic Finance news Volume 16 Issue 17 dated the 1st May 2019.

Aliredha Walji, Vice President, USA, contributed an article to Islamic Finance news outlining the five primary investment options for Muslims looking to invest alongside their beliefs.

Stocks and Islamic Exchange-traded funds are eligible for Shariah compliant consideration only if the companies they invest in receive less than 5% of their total income from non-compliant income sources which include non- Shariah compliant industries such as alcohol, tobacco, weapons, gambling, pornography, pork products, music and cinemas or broadcasting. Speculative trading in shares, short-selling, trading in derivatives or trading in unidentified items are prohibited, as are companies offering conventional financial services and insurance products.

But just because Shariah compliant investing prohibits certain companies, that does not mean that these investing options have to underperform. In the US, the S&P 500 Shariah Index has steadily outperformed the S&P 500 over the last five years. This is true globally as well, where in South Africa the Kagiso Islamic Equity Fund was the best single performing equity fund over the last three years. Shariah compliant investing is also a great hedge against leverage, as demonstrated during the 2008 financial crisis, where the FTSE Shariah All-World Index significantly outperformed the FTSE All-World Index…