This investment portfolio is made concerning Islamic law; this is made by respecting various factors considered “haram” in Islam, which allows investors to invest only in ethical stocks. With a Shariah stock portfolio, one can get ethical ways to make money, which impacts social responsibilities that are rational for every human to follow. Examples of ethical business practices are gambling, alcohol business, interest-based lending of personal loans, and many similar businesses that have a higher potential of affecting the other party to some extent.
Shariah Stock has given huge regard to humanity and religious beliefs and prohibited everything that is against Islam. This has acquired huge popularity among Islamic families as it has categorized those who like to do business but stay within the limitations of socially dignified ones.
What are the advantages of Shariah stocks?
Here are the advantages of shariah stock, for which it has gained huge popularity, are as follows:
- The companies that are considered to be involved in haram activities are excluded under this portfolio, like alcohol, pork, gambling, tobacco, porn and many more. Such companies that have a bad impact on society are prohibited under it. The investors don’t have to filter out where they want to invest.
- Debt is considered haram in Islam, especially for companies that lend and ask the borrower to repay with interest, which is prohibited under it. Companies with similar functionality are highly discouraged under Shariah stock.
- This portfolio asks the companies to invest one time and check on it continuously to ensure it adheres to Sharia laws and ethics. In case of not following any such principles, it will lead to the elimination of the business.
- If there is any non-compliant earning should be filtered and used appropriately. This can be done by taking out the non-complaint portion and donating it to the charity.
- No company investing under Sharia should be under debt, or at least the debt should be lower than the equity.
- As the need for ethical and social practices grows, the Sharia stock investment will also increase, making a place in the global investment landscape. This is a worthy option for muslim and non-muslim investors.
- This portfolio provides low returns compared to any other portfolio, but this is aptly managed because ethical practices include lower risk management.
- The Shariah investment professionals are always available to make investors consistent with all the compliances under this portfolio.
- Even if many sectors are considered haram and have been excluded under it, there are still many industries in which one can invest.
- The practices under it are sustainable and can be done easily because they come with lower risk management.
- The companies and investors involved have a better societal reputation than others. Which naturally impacts sustainability.
Avoid speculative prices
Under this portfolio, the business is stretched beyond geographical. The companies included are from the global market, which opens a new path for investors to enter the world market through shariah investment. This diversification increases sustainability and resilience. Even though it has been curated for Islamic people, the core objective attracts all.
