There are so many types of investment available and investors are always looking for different types of investment products to diversify and include in their portfolio. Investors who are Muslims usually have more difficult time in expanding their investments because of restrictions of their practice of Islamic belief. Before a Muslim investor invests, he/she need to first check if the product is permissible to invest or not.
Under the Islamic law which is known as sharia, Halal is defined as what is permissible. In simple word, halal means permitted. If an action or object is selected as halal that means it is permitted under the Islamic law. The opposite of halal is haram which means forbidden.
Investing in a permitted manner requires the decision of investing to be made in agreement with the Islamic principles. This is a faith based investment management. Halal investing is considered to be socially responsible or an ethical way of investing for investors.
Sharia, the Islamic law requires the Muslim investors to evaluate and asses an organization’s financial records and business activities before they think in investing in it. This research is done to determine how the company manages it income expenditure and from where the company gets it primary revenue. This information helps the investor in deciding whether the investment is acceptable, that is halal or not (haram).
For apparent religious reasons, halal investments are beneficial. The investors are required to share in profit and loss according to the Islamic principles and they cannot receive or take any / no interest which is known as riba. Muslim investors do not or cannot invest in a business that is prohibited under the Islamic law.
Halal investment is great way in diversifying and making good plans in an investment portfolio. These types of investments are carefully screened and filtered, thereby allowing the investor to avoid forbidden or haram businesses. This allows the investor to actively keep away from companies that have interest or riba and also companies with element of chance or gharar.
Some of the unacceptable companies by the Islamic law or sharia are producing or marketing of alcohol, gaming or gambling activities, pork, pork products, pornography, tobacco and conventional interest based financial service, etc. These companies primary business activities, violates the core beliefs of Islam.
There are many benefits in investing according to the Islamic principles for both the Muslims as well as the non-Muslims. It encourages a disciplined process in investing which also promotes in-depth security monitoring and research. These investments adhere to strict Islamic guidelines.