A Information to Halal Investing in Singapore, Cash Information

Halal investments not only comply with Islamic principles, but can also be just as profitable as conventional investments.

You may have heard that as a Muslim you must follow certain religious principles when investing and only have to adhere to halal investments.

But why do you need to make Islamic investments and how do you know which investments are considered halal?

In order to solve the riddle, it is important to first understand how Islam views finances.

In the Islamic faith, money is viewed as having no intrinsic value; It is considered a medium of exchange only, with one unit corresponding to another unit of the same denomination (i.e. USD 1 = USD 1).

This definition therefore introduces some limitations that are not present in secular financial systems. First and foremost, because $ 1 = $ 1, no one (individuals or organizations like banks) is allowed to make a profit by borrowing money or receiving money from someone.

That is, interest income is not allowed.

How does Islamic financing work when interest is not allowed?

To overcome this requirement, Islamic Finance uses a number of systems and frameworks to ensure a flow of capital that is compatible with the secular financial system that the non-Muslim world follows.

For example, consider a conventional (non-Islamic) mortgage where you borrow an amount of money from a bank to pay for your home.

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Under the terms of the mortgage, you will then make regular payments to repay your loan with interest.

If you are using an Islamic mortgage, the bank will first buy your home and then sell it to you at a higher price agreed in advance by both parties.

In this case, instead of directly charging interest on the loan, the bank will make a profit based on the trade.

There are many more financial models and systems used in Islamic banking, but our focus is on Islamic investing so let’s move on.

Halal Investing Versus Traditional Investing: What’s the Difference?

In addition to the limitation of the interest income (Riba), Halal systems have two further defining features:

• Investing in any company or activity that violates Islamic law is not permitted. This stands out the obvious ones like pornography, gambling, alcohol and pork, but also covers some other sectors like tobacco and armaments.
• Investing based on principles of uncertainty and gambling is not permitted. This prohibits certain types of investments such as options and futures. Interestingly, certain types of insurance are also not allowed, but Muslims can use a takaful to obtain similar benefits.

Due to the rigor of Islamic law, halal investments are also good candidates for those looking for ethical investments as they guarantee zero exposure to sectors or industries that some consider problematic.

(Note, however, that halal investing does not automatically mean investing that is environmentally friendly, environmentally friendly, sustainable, or good for the earth. While the likelihood of an overlap is good, there is a difference between Islamic and ethical investing.)

It is not enough just to adhere to these restrictions and guidelines. In order for an investment to be considered halal, several financial audits would have to be carried out, usually overseen by specially appointed Sharia advisors.

How would lay people proceed to invest in a manner consistent with Islamic or Sharia law?

How to Find Islamic Investments in Singapore

Use a Sharia-compliant robo-advisor or investment platform

One of the easiest ways to invest in Halal instruments is to join an Islamic robo-advisor or an online investment platform.

These platforms are monitored by a regulator to ensure that customers are only offered stocks and companies that comply with Sharia law.

One such popular platform is Wahed, a global Islamic investment robo-advisor with over 150,000 clients. Using the Wahed app, you can choose an investment portfolio based on your risk appetite, fund your account and watch your money grow.

Refer to a Sharia-compliant stock index

Those familiar with investing know that a stock index (like the Straits Times Index) tracks the performance of an underlying selection of stocks chosen to represent a relevant sector or market.

For example, the Straits Times Index (STI) tracks the top 30 companies that are traded on the Singapore Stock Exchange.

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Similarly, there are indices that only track Sharia-compliant stocks and shares. This makes them a handy reference for those looking for Halal facilities that also have a proven history of high performance.

First, try the FTSE SGX Shariah Index Series, which publishes indices on qualifying stocks in the Asia-Pacific region and Singapore.

You can also search for indices that track Sharia-compliant stocks in other markets around the world.

Once you find the index you want, you can invest directly in the companies listed in it by buying their stocks. Alternatively, you can also choose to invest in the indices yourself via an Exchange Traded Fund (ETF) such as the Wahed FTSE USA Shariah ETF.

Just type in “Sharia + ETF” or “Islamic + ETF” into Google and see what’s in store for you.

Look for Waqf investment projects

Inherent to Islam is the practice of waqf, which refers to a religious foundation (or donation) to improve or support the community through various projects such as building a mosque or school.

You can invest in such Waqf projects and get a planned return – you can easily think of that as crowdfunding for Islamic purposes.

To ensure that your investment really qualifies as a Halal investment, you should only invest through certified platforms. One such platform is Ethis.co, based in Indoensia. Warees.sg offers investment opportunities for real estate projects in Singapore.

If you don’t want to limit yourself to real estate projects with a Waqf angle, you can also try investing in Shariah-compliant REITs, some of which are included in Shariah-compliant stock indices (see previous section).

What returns can you expect from halal systems?

While Islamic investing has its unique features and requirements, it is not so far from conventional investing that a notable difference in returns can be observed. Halal investments do not limit the types of investments you can invest in, only the underlying companies.

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In all respects, you can be confident that your returns will be the same as those obtained by secular investors. There is no reason to believe that sticking to halal investing will put an investor at a disadvantage when all things are equal.

Instead, your results will depend on very personal factors, such as: B. your risk appetite, the platform you choose, your ability to make solid investments and much more.

And as with any other form of investing, keep in mind that there is some risk involved in investing. You should always do your own research, never invest more than you can afford to lose, and always seek professional advice before jumping in.

This article was first published on SingSaver.com.sg. All content is displayed for general informational purposes only and does not constitute professional financial advice.