Is Investing In Stocks Haram?

August 8, 2024

With the financial opportunities at our fingertips today, Muslims often find themselves asking: “Is investing in stocks haram?” This issue is both relevant and delicate, given the necessary balance between respecting religious doctrines and supporting one’s family financially in contexts where a single income may not be sufficient. 

Stocks are a potential opportunity to achieve financial freedom by way of passive income. And needless to say, Islam does not discourage us from seeking ways to increase our wealth. But Muslims must be careful in choosing how they want to grow their wealth, only pursuing avenues that do not distance them from God and Islam. 

Stocks are shares that represent a partial interest in a company. So when you buy a stock, you are buying a piece of that company, thus becoming a shareholder entitled to a share of the profits and an interest in the assets. If Company A has 100 shares, owning one stock means 1% ownership.

Muslims cannot invest in just any company by way of purchasing shares of it. Islamic law categorically prohibits making money from businesses involved in alcohol, pigs, gambling, and usury (riba).

For Muslim investors, the solution is sharia-compliant investing, which avoids the shares of companies engaged in prohibited activities. Sayyid Sistani offers guidelines regarding stock investments, saying that investing in stocks is permitted as long as the companies involved do not participate in prohibited industries, like: 

• Usurious loans in which Muslims are paying interest
• Alcohol
• Gambling
• Debauchery
• Any business that involves aiding oppression, promoting wrong beliefs, or promoting indecency

He advises Muslims to avoid earning through illicit means and to rather support companies that operate in sectors permitted by Islamic law.

How do I identify a halal stock?

The list above is not comprehensive, so you are probably still wondering how you can know if something is a halal stock for sure. So, how do we figure out which stocks are “halal”? 

Before investing in something, a Muslim investor can review company policies, practices, annual reports, ethics policies, and investment areas to rest assured purchasing its shares is not problematic. 

But even after all that, we might still find ourselves asking, “Is investing in stocks haram?” Hopefully by now it is clear that, by following faith-guided principles and consulting experts, Muslims can actively participate in growing their wealth while remaining true to their spiritual and ethical values. And if you want to be on the safe side, you can opt for sectors like healthcare and sustainable energy.

In addition, look to invest directly in shares—rather than opting for derivatives such as CFDs (Contracts for Difference)—for a transparent approach in line with Islamic teachings. This method of direct stock investing allows you to own real, tangible company shares and avoid ambiguity. Othe

CFDs, meanwhile, are financial instruments that allow you to speculate on the price of an asset without actually owning it, which can introduce a level of uncertainty and speculation that would make such transactions invalid according to sharia, though they could be lawful if both sides reach an agreement to allow each other to dispose of the profit. 

Contact us here if you have a question about a particular stock.

 What are some halal stocks to invest in?  

Now that we know the rulings of stocks, one must ponder the question, what are some halal stocks to invest in?  We’ve been asked the question, “Is investing in stocks haram?” a number of times, and we’ve answered that it is permissible with certain conditions. But which stocks should we purchase? Fortunately, there is now a version of the S&P 500 that has done the work for Muslims, as it does not include stocks that oppose sharia. It is known as S&P Global or S&P 500 Shariah.

The S&P 500 Shariah index was created in 2007 to offer Muslim investors investment choices that comply with Islamic law, responding to a growing demand. This initiative is part of a wider movement in finance to develop products that are ethically and religiously appropriate for various groups. 

Managed by S&P Dow Jones Indices, the index relies on a team of financial analysts, researchers, and Islamic scholars. The scholars play a key role in making sure the index stays true to sharia law by vetting companies for compliance with Islamic ethical standards. This process involves regular monitoring, reviews, and audits of the companies in the index.

Where else can I find halal stocks? 

Halal stock screeners, such as Islamicly, Zoya, and Wealthsimple Halal Investing, are designed to help Muslim investors. These tools filter and classify stocks based on their compliance with Islamic principles, saving you time and effort in identifying the right investment opportunities.

There is also a community of investors who share and support each other in seeking investments that respect religious standards when trading in the “halal market”. This community communicates and collaborates through forums, social media platforms, and dedicated investment clubs, where information and experiences are exchanged.

Consulting with an informed religious scholar before investing can offer further clarity and reassurance. Qualified scholars can evaluate whether a specific financial stock or strategy aligns with Islamic teachings, thus ensuring that your investments are profitable and spiritually rewarding.

A sample list of halal stocks

The Musaffa Academy provides a list of Nasdaq 100 stocks that meet Islamic rules, making it easier for Muslim investors to find suitable investments. They check these stocks carefully to make sure they follow Islamic financial rules and avoid businesses involved with gambling, alcohol, and lending money with interest. Big companies like Apple, Tesla, and NVIDIA are on the list, offering good investment options that respect ethical standards. 

Company Name	Ticker	Market Cap	Status	Rating
Apple Inc.	AAPL	3.32T	Halal	1
Tesla, Inc.	TSLA	585.07B	Halal	4
NVIDIA Corporation	NVDA	3.18T	Halal	3
Broadcom Inc.	AVGO	787.78B	Halal	2
AstraZeneca PLC	AZN	–	Halal	1
Cisco Systems, Inc.	CSCO	182.81B	Halal	2
Walgreens Boots Alliance, Inc.	WBA	13.25B	Halal	1
Splunk Inc.	SPLK	26.44B	Halal	2
ASML Holding N.V.	ASML	387.76B	Halal	5
Adobe Inc.	ADBE	203.37B	Halal	4
Gilead Sciences, Inc.	GILD	79.60B	Halal	1

Other questions about stocks

1. Is investing in crypto haram? Muslim jurists have had extensive discussions about cryptocurrency. Some contend that certain cryptocurrencies share similarities with gambling, making them haram. Others maintain that investing in them responsibly and steering clear of unlawful activities could be deemed halal under certain conditions prescribed by Islamic law. Sayyid Sistani has refrained from providing a fatwa on investing in cryptocurrencies like Bitcoin and Ethereum, which means that believers can refer to the opinion of the next most knowledgeable marja.
2. What is the ruling on marijuana or cannabis investments? According to Sayyid Sistani, this depends on what the marijuana is used for. If the marijuana is being sold for recreational use that will cause harm to the individual or the community, then purchasing its stock is prohibited. But if a particular company uses the plant for harmless or beneficial purposes, like making textiles or medicine, then investing in it is permissible and will be considered a halal stock.
3. What if a company has both halal and haram forms of transactions? According to Sayyid Sistani, one is not allowed to invest in companies that make money from both permissible and impermissible activities, unless the latter component is a very small percentage (more below). This means investing in businesses like cruise ships, airlines, or theme parks isn’t allowed if they make a considerable amount of profit from selling alcohol or from activities like dancing and music.
4. What about music streaming companies? To answer the question, let’s take the example of Spotify, a tech company that makes money through its music streaming service. Some people pay a monthly fee to listen to music while others support the company by way of ads. 

When considering whether it’s permissible to invest in Spotify’s stocks, one must think about how they earn their profits. If a portion of Spotify’s profits come from activities considered unlawful by Islamic principles, such as music that is prohibited, then investing in Spotify would generally not be allowed. 

However, if the income from such unlawful activities is very small, say 1% or less of the total income, then it could be permissible. Still, any money made from these small portions of unlawful activities should not be kept. Instead, it should be given away to believers in need.

5. What about airlines that serve alcohol? This scenario is a bit more complex. While airline revenue is not derived solely from alcohol sales, this aspect of their business does make a direct investment in the company problematic.

If it is possible to structure an investment in such a way that you only invest in parts of the airline that do not involve alcohol sales, such an investment would be permissible. This would involve specific stipulations in the investment agreement that exclude the earnings made from alcohol.

6. Should we look at the social impact of a company’s operations and whether or not it benefits the community? Islam strongly emphasizes contributing positively to society. Investing in companies that uphold these values ​​not only aligns with your faith but also supports the greater good. If it is possible to invest in such companies, then that should be preferred. If that is not possible, then one should still make sure that the company’s income from unlawful activities is very small (as mentioned in the fourth point here).

Is investing in stocks haram? A case study

Let’s imagine that Amina, a young graduate who has just entered the working world, wants to invest part of her savings. She has the same question we’ve all had: ”Is investing in stocks haram?” She very much wants her money to be halal and be in accordance with Islamic principles.

So she consults a financial advisor who suggests investment funds with great promise. His presentation is backed by data and years of experience. But deep down, she is still uncomfortable. Amina is concerned that the activities supported by these companies may not be fully halal. “What if they profit from alcohol or gambling?” she wonders.