Is investing haram or halal? This is how Islamic investing works!
Are you curious whether investing in shares, Forex & crypto is haram or halal? On this page, I discuss in detail how you can invest according to Islamic Law: 100% halal.
Is investing haram?
Investing is not necessarily haram. According to Islamic doctrine, an investment must meet certain conditions to be considered halal. Below we discuss these conditions briefly:
- Interest: the investment product may not be linked to the payment of interest.
- Direct payment for transaction costs: the transaction fees cannot be charged indirectly.
- Immediate execution of the investment: the investments must be executed without delay.
In the rest of the article, I will delve deeper into halal investing.
Where can you invest halal?
Are you looking for a reliable broker where you can invest according to Islamic principles? You can invest halal with the brokers listed below:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of ! 82% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of with a free demo! |
What are the rules of Islamic investing?
- Receive profit: as a Muslim, you are allowed to benefit from the profit made by a company. However, it is not allowed to receive interest payments.
- High leverage: you may not invest in companies that have a lot of debt. Investments in companies where more than 33% of the market capitalization consists of debt are not allowed.
- Not too many open positions: a company that has more than 45% of its assets open (accounts receivables) is haram.
- Research: as a Muslim, you must do sufficient research on a company. It is only allowed to invest in halal stocks.
Is investing in stocks haram?
Investing in stocks is not haram, at least when you invest in the right type of shares. If you want to invest according to Islamic law, it is important to investigate the nature of the company’s activities. Below you can see an overview of the shares in which you can invest:
Which stocks are halal?
- Production
- Clothing & shoes
- Medicine & Pharma
- Real estate
- Tools
- Logistics & transport
- Furniture
- Alcohol
- Pornography
- Casino
- Drugs
- Hotels & nightclubs
- Tourism
- Banks that lend money
- Insurance companies
What if it is not clear?
There are also shares where it is not immediately clear whether an investment is fully halal. Think, for example, of a transportation company that charges interest on outstanding bills. Such companies are named “mixed” companies.
Most Islamic scholars agree that it may be halal to invest in such mixed companies. You can then investigate what percentage of the income comes from practices that are not allowed according to Islamic law. If 5% of the income comes from interest, you can donate 5% of the money you earn from your investments to a charity.
Interest is haram
Within Islamic teachings, it is not allowed to charge interest. Therefore, when buying stocks, it is important to investigate whether the company has a high debt. When companies have a lot of debt, they may be haram. There is a high chance that most of the income comes from interest payments.
Furthermore, when investing yourself, you have to be careful with interest. According to Islamic teachings, you are not allowed to use margin when interest has to be paid on it. With many brokers, you can open a special Islamic account without interest payments.
Is Forex halal or haram?
Many Muslims wonder if trading Forex or currencies is halal. Investing in Forex is halal in most cases. However, you should keep in mind that Forex is often traded with CFDs. A CFD is an instrument that allows you to trade currencies with leverage. Many brokers then charge interest on your position when you hold it open for longer than a day.
If you want to trade Forex halal, you need to open a special Islamic account. On an Islamic account, no interest costs are charged when you hold the position for longer than a day. An Islamic account also charges no swaps, but you do pay a higher commission when opening a position.
Is investing in crypto & Bitcoin haram?
As a Muslim, you can also invest in Bitcoins and other cryptocurrencies. It is important to buy these digital coins with your money. When you do this, you do not pay any interest. I recommend Bitvavo for trading crypto: with this platform, you do not pay transaction fees on your first €1000. Click here to open an account with Bitvavo.
Are bonds haram?
As a Muslim, you cannot invest in bonds: they are always haram because of the interest payments on the loan. A bond is a loan issued by the government or a company.
Special Islamic funds
Some investors focus primarily on the long term. According to Islamic teachings, you may not invest in companies involved in gambling or alcohol. Companies that charge or pay high-interest rates are also excluded. For Muslims, there are special funds that exclude these companies.
One well-known investment fund is the Amana Mutual Fund. This fund has regularly outperformed the S&P 500 because many financial companies are absent. This allowed the fund to perform better during economic crises.
Can Muslims Invest according to Islam teachings?
As a Muslim, you can definitely invest! You may need to do a little more research to determine whether a stock is halal or haram, but even with the available options, you can achieve a positive return.
FAQs About Islamic Investing
Investing with an Islamic account can bring advantages. Normally, you pay interest for every day you hold a position. With an Islamic account, no interest may be charged. This allows you to hold positions longer and potentially achieve a greater return.
An Islamic account is less suitable for short-term investments. Because of the commissions you have to pay, you can achieve a lower return.
As a Muslim, you can speculate with any type of investment account if you do it wisely. Paying interest is haram. When you speculate on, for example, stocks or currencies with derivatives, you pay interest if you hold the position open for more than one day.
Day traders close their position before the end of the day. Day traders speculate on rising and falling prices. By closing your positions in time as an active investor, you can therefore actively trade halal.
As a Muslim, you may not invest in real estate if you have to take out a loan for it. The Murabaha construction can offer a solution. In this construction, the bank buys the house and sells it to the future investor at a higher price. You then repay the purchase price to the bank in instalments, so you do not have to pay interest.
When you have the money from your investments paid out, you normally place it in a bank account. However, a savings account is haram if you receive interest on it. For this reason, special Islamic banks have been established. Moreover, you can be sure that these banks do not invest in haram companies or charge interest.
When you want to invest halal, you are limited in your options. For example, you cannot invest in leverage products or bonds. It is also difficult to invest in real estate because you cannot get a mortgage. In the West, Islamic investing is also not very popular, which means you need to do a lot of research to find a suitable broker.
The Islamic world appears to have no issues with cryptocurrency. The Islamic writer Monzer stated in 2014 that Bitcoin is halal, and this conclusion was confirmed by the jurist Muhammad Abu Bakar. Moreover, you can see that Bitcoin is already an accepted payment method in countries such as Indonesia and Malaysia despite their large Muslim populations.
Investing in gold is not necessarily haram. You can invest in gold as a currency, but you cannot invest in gold with futures.
