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If you are concern about ethical investments, then the halal investment products available in the market are for you. Halal investment is an ethical and sustainable investment available for Everyone, including Muslims and non-Muslims. In this article, we pick up some halal investment products you can invest in. Before, you may want to know the principles of halal investment.
The Golden rules of Halal Investment
When it comes to halal investment, every element that forms this instrument must adhere to the Shariah principles. Halal investing is like socially responsible investing, which demands social values and good governance by screening out businesses that engage in activities that are considered unethical, such as gambling, alcohol, pork, weapons, etc. Shariah law specifically prohibits the payment or receiving of interest on money-lending (riba), as well as the use of excessive ambiguity in transactions (gharar).
The halal investment must fulfil the requirements of free from riba, gharar, maysir, and impermissible activities. In addition, respect for the environment and human welfare, fair and transparent dealing, and fair and just employment and R&D policies are also among the Islamic business values. Moreover, Islamic Finance scholars even have set the rules of Shariah screening methodologies to filter the prohibited elements in equity investment. The Shariah screening methodologies consist of two screenings; business and financial screening.
5 Halal investment Products Available for you
1. Islamic unit trusts/ mutual funds,
Islamic unit trust/ mutual fund is a collective investment scheme that pools investors’ funds with similar investment objectives. Furthermore, the professional investment manager will invest the fund in shariah-compliant securities according to the fund’s objective and investment strategy.
2. ETF (Exchange Traded Fund)
ETF is an open-ended, index-tracking unit trust fund whose primary objective is to achieve the same return as the benchmark index. Unlike the other unit trust fund, ETF’s units are listed and traded on a stock exchange, also traded during trading hours just like shares. The main difference with the conventional ETF is that Islamic ETF only tracks an Islamic benchmark index
In addition, both Islamic unit trust/ mutual funds and ETF should be overseen by the Shariah advisors or committee.
3. Halal Stocks
Stock is a security that holds proportionate ownership of a particular company. Furthermore, halal stocks must undergo the Shariah screening assessment. The screening consists of business screening and financial screening. The Shariah screening ensures that the company does not involve in impermissible activities and unacceptable levels of financial operations.
4. Property/ REITs
A REIT (real estate investment trust) is a firm that owns assets that generate income from property businesses. This is a type of investment vehicle that aims to put most of its money into real estate or real estate-related investments. You will receive dividend payments every month or every three months. Moreover, It is an easy method to make money from a rental property without dealing with the issues that come with owning actual property.
5. Sukuk
Sukuk are financial securities with sharia-compliant terms and structures, intending to produce returns comparable to conventional fixed instruments like bonds.
Instead of representing the issuer’s debt obligation (like in conventional bonds), Sukuk technically represents an interest in an underlying sharia-compliant funding arrangement. Sukuk entitles the investors to a proportionate share of the returns generated by the arrangement and the return of the capital at a future date.
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