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Real-Life Use Cases of Musaffa Premium Features

This article shows how you can use Musaffa Premium’s advanced features to make smart Halal investment decisions. Discover the real benefits Musaffa’s Halal Investment Research Tools offer you.

 

1. Halal Stock Screener, Compliance Rating, and Detailed Compliance Report

The first step in halal investing is determining which stocks are suitable for investment. Before looking into the stock’s performance, you want to make sure the company is Shariah-compliant. The Musaffa Halal Stock Screener allows an investor to examine the stock’s compliance status and level of compliance using Musaffa’s proprietary halal rating methodology. The higher the rating, the greater the degree of Shariah compliance, giving investors more confidence in investing in Halal stocks. 

What happens if you invest in low-halal-rated companies? A low rating suggests that the company’s compliance assessment is close to the threshold of halal screening criteria. As a result, companies with a low rating may fall into non-compliance as soon as they engage in more non-compliant activities or increase their interest-bearing assets, securities, or debts. Knowing the level of Shariah compliance ahead of time will allow you to anticipate future halal portfolio rebalancing, potentially reducing the rebalancing costs.

2. Stock Compliance History

When a stock changes its compliance status after a company releases a new financial report, you might miss the notification from Musaffa. But now, you can easily check the stock’s Shariah-compliance history. This feature shows when a stock changes from halal to non-halal or doubtful and vice versa.

According to Musaffa’s Shariah advisors, Mufti Faraz Adam and Shaikh Dr. Aznan Hasan, you must take purification action when a stock becomes non-compliant. Understanding a stock’s compliance history helps you make informed purification decisions. 

If a stock turns non-compliant, Shariah advisors allow a grace period of 90 days—until the company’s next quarterly financial reports are published and compliance is re-analyzed. During this period, you can still hold your shares. After 90 days, if the stock is still non-compliant, you must sell your shares. Any gains you received during the non-compliant period should be donated to charity to keep your wealth purified.

If the stock returns to a compliant status later, in less than 90 days, you don’t need to sell it. However, any dividends received during its non-compliant phase should be fully donated to charity.

3. Portfolio Compliance Tracker

After finding the Halal stocks, you will build your portfolio through a brokerage account.

As a Muslim investor, the next crucial step is to monitor its compliance status. With Musaffa’s portfolio compliance tracker, you can seamlessly link your brokerage account to your Musaffa account and keep an eye on your portfolio’s compliance status. The tracker will alert you if any stock in your portfolio becomes non-compliant, helping you make informed decisions about rebalancing to ensure your portfolio remains compliant. 

If your brokerage account isn’t supported for linking with Musaffa, don’t worry! You can still manually input your holdings to track their compliance.

4. Portfolio Purification Tracker

According to AAOIFI Shariah Standards No. 21 about financial paper (shares and bonds), 

A Muslim investor or trader must eliminate prohibited income from the share mixed up with the company’s earnings. In general terms, it is called purification.

Purification is an essential aspect of Halal investing because some portions of the companies you invest in may not be Shariah-compliant. Purification is necessary to ensure your investments adhere to Shariah guidelines. Musaffa is here to make your purification calculation easier.

Once you have linked your brokerage account on the Musaffa platform, you can monitor the compliance status of your portfolio. When you sell a stock, Musaffa automatically calculates the ‘not halal’ portion of your income based on the holding period. Then, you can dispose of the purification amount for charity or Sadaqa. This automated calculation helps you understand how much needs to be purified from your earnings, ensuring your investments remain Shariah-compliant. 

5. Stock Forecast 

After you choose a halal stock to invest in, you should understand how the company is expected to grow. You can go to the forecast section on the stock’s dashboard to see its annual target prices, revenue forecasts, and earnings forecasts. Additionally, you can view analyst recommendations for that stock. However, please remember that Musaffa does not provide these recommendations (like Buy, Sell, or Hold). These recommendations come from independent analysts from stock rating firms around the world. We encourage our users to avoid buying non-compliant stocks. 

6. Complete Investment Checklist

When making an investment decision, it’s not enough to just look at a company’s projections. We know it’s impossible to predict the stock market with certainty. You should also consider factors like the company’s profitability, volatility, risk, and dividends. To help you make better investment decisions, we’ve provided four key metrics that represent the stock’s performance.

Here’s how you can use the four metrics in the investment checklist:

1. Expected Return Ratio

The Expected Return metric helps you understand the potential profitability of your investment. It estimates the average return you can anticipate from an investment based on historical data and projected future performance.

Expected Return formula:

R is the rate return in a given scenario, P is the probability of that return for each scenario, and n is the number of scenarios.

For example, for the given investment opportunity, if there is a 45% chance of a 20% return, a 50% chance of a 10% return, and a 5% chance of a 10% loss, the expected return can be calculated by plugging these values into the formula. The expected return in this example would be 13.5%.

Expected Return = (45% x 20%) + (50% x 10%) + (5% x ( -10%)) = 9% + 5% + (-0.5%) = 13.5%

2. Stock Volatility

You can also measure the stability of the investment using the Stock Volatility metric. It indicates how much the price of a stock fluctuates over time. Higher volatility means higher risk, while lower volatility suggests a more stable investment.

Beta is a statistical measurement that compares a stock’s volatility to the overall market’s volatility.

  • A stock with a beta of 1 is expected to move with the market.
  • A stock with a beta of less than 1 is expected to be less volatile than the market.
  • A stock with a beta greater than 1 is expected to be more volatile than the market.

3. Sharpe Ratio

Assess the risk-adjusted return of your investments with the Sharpe Ratio. It was introduced by William Sharpe in 1966 for its simplicity in helping you understand how much excess return you are receiving for the extra volatility you endure. A higher Sharpe ratio indicates a better risk-adjusted return.

When comparing two portfolios, it is important to consider their expected return and the risk involved. For example, Portfolio X is expected to give a 15% return over the next 12 months, while Portfolio Y is expected to deliver a 10% return over the same period. At first glance, Portfolio X is the better choice based on returns alone. However, when considering risk, the Sharpe ratio provides a more comprehensive view of the investments.

Let’s assume that Portfolio X has a standard deviation of 9% (more risk), Portfolio Y has a standard deviation of 4% (less risk), and the risk-free rate is 3%, the yield on a medium-term U.S. Treasury security.

Portfolio X: (15% – 3%) / 9% = 1.33

Portfolio Y: (10% – 3%) / 4% = 1.75

By calculating the Sharpe Ratio for each portfolio, Portfolio Y has a higher score of 1.75 than Portfolio X, with a score of 1.33. This tells us that Portfolio Y provides a better risk-adjusted return.

The Sharpe ratio is commonly considered good if it falls between 1 and 3 and excellent if it is higher than 3.

4. Dividend Yield

Last but not least, evaluate the income potential from your investments with the Dividend Yield metric. It shows a company’s annual dividends as a percentage of its stock price. It’s a useful metric for investors seeking regular income from their investments.

For example, if a company’s stock trades at $50 per share and pays an annual dividend of $1 per share, the dividend yield would be 2% (1/50). This means that an investor would earn a 2% return on their investment in the form of dividends if they were to buy shares of that stock at its current price.

7. Super Investor Portfolio 

Becoming a top-notch investor doesn’t happen overnight. It requires dedication, continuous learning, and plenty of experience in managing investment portfolios.

Looking into the portfolios of successful investors can provide valuable insights and new investment ideas. By analyzing their strategies, you can see what has worked for them.

For Muslim investors, it’s essential to ensure your portfolio is Shariah-compliant before using these benchmarks. Now, you can check the compliance status of top investors’ portfolios on the Musaffa platform!

Among the super investors you can explore are:

  • Warren Buffet – Berkshire Hathaway
  • Kenneth Lawrence Fisher- Fisher Investments
  • Bill Gates – Bill & Melinda Gates Foundation
  • Cathie Wood- Ark Invest
  • And many others

8. Stock Coverage Request of Your Desired Stock

Our mission is to cover and analyze the Shariah-compliant status of all stocks globally. While this will take time, you can help us achieve it!

If you can’t find a stock’s Shariah compliance status on our platform, you can request a compliance analysis from us. Our team of experts will screen the stock and get back to you within 48 hours with the information you need. Your requests will help us to expand our coverage. Moreover, you can also request our analyst to update the compliance status of stocks so you can get the latest status after the company releases the new financial report.  

Final Thoughts

Musaffa Halal investment research tools allow investors to make informed and ethical decisions that align with their financial goals and Islamic values. With features like detailed Shariah compliance reports and automated purification trackers, investors can thoroughly vet potential investments while ensuring continuous Shariah compliance. Investors can also benefit from insights into the portfolios of legendary investors.

Musaffa Premium equips you with the tools to make informed and Shariah-compliant halal investment decisions. Our goal is to create a comprehensive halal investment ecosystem using advanced tools and a user-friendly interface. By subscribing to Musaffa Premium, you’ll gain access to our halal investment research tool and ensure your wealth remains compliant with Shariah guidelines.