“The legal guardian of an orphan should invest the orphan’s inheritance lest it’s consumed by zakat payments.”The Prophet Muhammad, as reported by Al-Tirmidhi
The aforementioned hadith highlights the following, crucial fact:
Saving and investing go hand-in-hand. By not investing savings, a person is acting irresponsibly as these savings are consumed by zakat payments (and inflation) over time.Tweet
Saving AND investing are extremely important. How does one go about doing this? What products are Islamically permissible? What stocks can I buy? Is there an “Islamic bond”/GIC product?
Here are some halal investing options specifically for Canadians. Some of these are available for Americans, too.
Disclaimer: I'm not endorsing or advising you on HOW to invest. I'm sharing some possible avenues. I don't have any financial incentives from any of these products.
Investing in Stocks/Equities
The following is a list of equity-based investment products.
- WealthSimple’s Halal Portfolio A basket of stocks based on the MSCI Islamic Series, with good diversity of countries and sectors
- Global Iman Mutual Fund A well-established, Canadian mutual fund (comes with a high management fee)
- HLAL ETF by Wahed Investments An American-based ETF, comprising entirely of American companies
- SPUS ETF An S&P 500 ETF that excludes the non-shariah compliant companies
- Zoya App for Stock Screening Want to purchase stocks yourself? The Zoya App does a great job screening for Shariah compliance
Investing in Payment Streams
Payment streams are financial products that give a fixed income to the investor. These include bonds, GICs and REITs (Real Estate Investment Trust). Unlike stocks, the goal of these products is to generate a steady income stream for the investor.
What is an Islamic version of a payment stream product? That would be a Sukuk or a Shariah compliant REIT.
A sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Islamic religious law commonly known as Sharia. Sukuk involves asset ownership while bonds are debt obligations. Both sukuk and bonds provide investors with payment streams.Investopedia
How does a Sukuk product work? Here’s an example:
Take Emirates airlines, for example. When they’re growing out their fleet of airplanes, they can’t necessarily just go out and buy airplanes. They could borrow money, but they’ve chosen to use the sukuk market, where you have a fund with investors who go out and buy the airplane. They then turn around and lease it to the airlines. That lease income basically comes back to the shareholders.ETF.com