There is a lot of confusion surrounding the topic of investing and whether or not it is halal in Islam. So, is investing halal or haram in Islam?
This blog post will aim to clear up some of that confusion and provide a definitive answer on the matter.
We will explore whether or not investing in stocks, cryptocurrencies such as bitcoin, and other types of investments are haram, as well as look at some halal investment options. So, is investing haram in Islam?
Is investing haram?
There is a big debate in the Islamic community on whether or not investing is haram or halal. For the most part investing is not haram in Islam. There is a common misconception that because investing involves risk and speculation, it must be haram. However, this is not the case.
The Quran encourages Muslims to engage in business and commerce, and many Islamic scholars have said that investing is permissible as long as it is done responsibly and ethically.
Is investing halal in Islam?
Halal is an Arabic word that means “permissible.” So, when we say that something is halal in Islam, it means that it is permissible according to Islamic law. Many things are considered halal, such as eating foods prepared ethically.
In the same way, investing is also considered halal as long as the business is not engaged in prohibited industries such as alcohol, gambling, or pork-related products.
So, if you’re wondering whether it’s halal to invest in stocks, the answer is yes, as long as the company you’re investing in is not involved in any of the prohibited industries mentioned above. There are many halal companies to invest in, which we will go over later on in this article.
On top of gambling industries themselves such as casinos, online betting, and sports betting, many other types of businesses are also involved in gambling. For example, some companies manufacture slot machines or poker chips.
Others may own or operate horse racing tracks. And still, others may provide services to gambling businesses such as accounting, marketing, or website design. All of these businesses are considered haram in Islam because they are directly involved in gambling.
Many investors also treat the stock market as a gamble itself. This type of investing is called speculation, and it’s haram in Islam because it’s based on pure chance rather than any sort of productive effort. Gambling is not halal, even when disguised as investing.
Is investment in stocks halal?
Yes, investment in stocks is halal but it depends on the type of stocks and the company’s activities. In addition to the industries mentioned above, tobacco is also prohibited for Muslim investors.
Any company that generates a significant portion of its revenue from tobacco products is not halal to invest in. For example, companies such as Philip Morris and British American Tobacco would not be halal to invest in.
It’s also important to note that profiting from debt is also not halal in this faith's perspective. Many companies use debt to finance their operations, and this can make them haram for Muslim investors. This is because the Quran prohibits usury, which is the practice of lending money with interest.
Therefore, if you want to invest in halal stocks, you need to make sure that the companies you’re investing in are not involved in any of the prohibited industries and that they do not have a lot of debt.
This can be a difficult task as it limits your options. But by working with funds that find and invest in halal companies, you can make sure your investments are ethical and compliant with Islamic law. Wealthsimple has an excellent example of a fund like this.
Why stocks are haram in Islam?
The reason why some scholars will pursue the stance that stocks are haram is because of the inherent speculation and risk that is involved in stock trading. While there is a chance to make a profit, there is also an equal chance to make a loss.
In Islam, gambling is haram and is seen as a sin. Therefore, if there is speculation involved in an activity, it would be classified as gambling and would be haram.
Even if you are investing with sound principles, other market participants might treat the market that you participate in as a casino. For example, you can write out an investment thesis in a halal company that has no debt.
You can invest with such a small amount of your total net worth that the risk is negligible. Even if the company goes bankrupt, your life does not change much. You would still be able to afford your basic necessities and live a comfortable life.
On the other hand, someone else might be levering up their entire net worth to buy the same stock, and if the company goes bankrupt, they would be left with nothing.
In this case, the market is more like a casino for that person, and it would be classified as gambling and haram. But just because you are both investing in the same asset, you can be lumped together with that person and be seen as gambling.
This might be the case, even though your investment thesis and risk profile is completely different.
There are also some cases where the company itself might be doing things that are not halal, such as selling alcohol as we mentioned earlier. Even receiving debt from an Islamic bank is not allowed in some cases.
Therefore, if the company is not following Shariah's principles, it would be haram to invest in them. Debt is considered to be a form of riba, which is prohibited in Islam, especially if interest rates begin to rise.
Another reason why stocks might be seen as haram is because of the lack of transparency. In the public markets, you do not know who the other participants are and what their motives are. It is a completely anonymous market. You do not know if the person trading against you is a retail investor like yourself or a large hedge fund that is trying to manipulate the market.
There have been cases of market manipulation, insider trading, and other forms of fraud in the stock market. If you do not have complete information about the market and the company that you are investing in, you could be taken advantage of by someone else. This lack of transparency can lead to some people feeling that stocks are haram.
So, these are some of the reasons why stocks might be seen as haram in Islam. However, other scholars see it as halal as long as due diligence in both the practices of the company as well as the market is done.
It is important to remember that there is no clear consensus on this issue and it ultimately comes down to interpretation. You should consult with your own religious scholar to get their opinion on the matter before making any decisions.
Is Bitcoin haram or halal?
This can be difficult to answer but it is generally not haram. Contrary to popular belief, Bitcoin is identified as closer to a property than a currency. If it is used as a store of value, then it is not haram. Similarly, gold and silver have been used as a store of value and are not haram.
Bitcoin, however, cannot be used for real-world purchases as of now (in most countries), and therefore it may only have speculative value. This speculation can be seen as a gamble for some scholars and in this case, would identify it as haram. Lending out Bitcoin and charging interest on it is also not allowed as this is a form of riba.
As you can see, there is no clear-cut answer on whether or not Bitcoin is halal or haram. It depends on how you use it and interpret the Shariah principles.
It's also a relatively new asset and scholars are still learning about it. If you are keen on investing in Bitcoin, make sure you do not gamble with it or lend it out with interest. Approaching it as property and a store of value is generally seen as more acceptable.
Is investing in Apple halal?
When it comes to excessive debt, Apple has passed some scholars' tests but there is a debate about whether or not the entirety of the business is halal. For example, their content streaming service, Apple TV+, has been deemed haram by some scholars because it contains explicit material.
Other than that, Apple passes most of the standards for being a halal investment. They make most of their revenue from selling physical goods such as phones and laptops, which are not prohibited.
They also have a low amount of debt and their products are not harmful to society. The phones can be used to access haram content but it's up to the responsibility of the user to only access halal content.
Overall, Apple is a fairly halal company to invest in but there are some gray areas that you should be aware of before making a decision. It's best to do further research if this concerns you.
Is investing in Tesla halal?
Tesla is considered halal by most standards because they produce physical goods that are not harmful to society. However, there is some debate about whether or not the company is too heavily reliant on debt.
They do not lend out money for interest as this would be haram, so this is not an issue. This could be seen as a form of riba and would make Tesla's business model haram.
The main concern with Tesla is that they may not have enough cash flow to cover their debts. This could lead to speculative investing or trading which is a fine line between halal and haram.
If you are considering investing in Tesla, make sure you do your own research based on sound investing and not FOMO gambling.
Similar to Apple, some haram content can be accessed through Tesla's cars but that is not the fault of the company itself. Those of the Islam faith should avoid such content and use Tesla's products in a halal way.
Is Future Trading Haram in Islam?
Yes, futures trading is considered haram in Islam because futures are a type of speculation that is not based on real asset ownership. As you know by now, in Islam, speculation is considered gambling, which is haram.
Halal stocks to invest in
Here are some halal stocks you can consider investing in:
- CLP Holdings Ltd
- Nestle SA
- Barry Callebaut AG
- Hong Kong & China Gas Co Ltd
- Novartis AG
- Givaudan SA
- Air Liquide SA
- Singapore Telecommunications Ltd
- Roche Holding AG
- Wolters Kluwer NV
- Geberit AG
- Beiersdorf AG
- Kone Oyj
- Unilever PLC
- MEIJI Holdings Co Ltd
- Symrise AG
These are the top holdings in the Wealthsimple Shariah World Equity Index (WSHR). By investing in this index fund, you can get exposure to a broad range of large, well-established companies that are compliant with Shariah law. You can visit the fund's website and pick individual stocks if you want more control over your investments.
Halal stocks in the US
- Waste Connections Inc
- Walmart Inc
- Johnson & Johnson
- Procter & Gamble
- Pfizer Inc
- Microsoft Corp
- Twitter Inc
- ZoomInfo Technologies Inc
- Snap Inc
- Pinterest Inc
These are just a few of the most popular halal companies to invest in if you are looking for U.S based companies. As you can see, there are still plenty of options available to you even if you are from the Islamic faith.
You can find a full list of halal stocks on the Wealthsimple website. The iShares MSCI World Islamic UCITS ETF is another great option for those looking for a diversified, halal-compliant investment.
Religion and investing rarely intertwine but asking these questions is important for spiritual wealth. By participating in halal investments, you can ensure that your money is going into companies and products that are ethically sound and in line with your Islamic values.
There are many halal companies to choose from, so do your research and make an informed decision about where you want to invest your money.