Benefits of Halal Investing
Halal Investing is for Everyone
Whether you are looking to align your finances with your religious principles or your investing goals, mutual funds that follow Islamic principles can offer many benefits to Muslims and non-Muslims alike. Halal investing encourages a disciplined investment process that promotes in-depth security research and monitoring, and other risk-reducing considerations.
“Low debt” Requirement
In order to be considered Halal, these funds invest minimally in debt. This conservative approach is appealing for risk-averse investors.
Low Portfolio Turnover
Halal investing principles encourage tax-efficiency and low portfolio trading expenses. As some Islamic scholars consider high portfolio turnover rates as a type of gambling, Amana funds avoid short-term speculation. In addition to minimizing broker commissions, this approach also reduces the amount of taxable capital gains.
Halal investing is when investment decisions are made in accordance with Islamic principles. Investors are responsible for ensuring they consider these guidelines as they handle their finances.
- Share in profit and loss
- Invest in Islamic-Compliant companies
- Receive no interest (riba)
- Cleanse haram income
Amana Mutual Funds Trust and Saturna Capital offer a variety of mutual funds and financial tools to help Muslim investors navigate these requirements.
Share in profit and loss
Share in profit and loss
Islamic financial principles require that investors share in the profits and losses of their investments. Mutual funds inherently involve risk-sharing among investors.
Sharia-compliant companies
Sharia-compliant companies
Halal funds are prohibited from investing in companies with haram sources of revenue. Islamic scholars propose a variety of guidelines for determining halal companies, but we follow the “five percent rule”. This rule prohibits investing in companies with haram core business activities — business activities that account for more than 5% of revenue. This ensures that our funds contain companies in halal industries and with halal business activities.
These activities include the manufacture or marketing of alcohol; gambling or gaming activities; conventional interest-based financial services; pork and pork products; and adult media. In addition, most Sharia scholars advise against investing in tobacco companies.
Receive no interest (riba)
Receive no interest (riba)
Interest, or riba, is another haram source of income. As with haram industries, halal funds do not invest in companies whose total revenue from interest exceeds five percent.
Cleansing Haram Income
Cleansing Haram Income
While it's important to minimize haram income, avoiding it completely isn’t always possible. We've collaborated with Islamic scholars to create halal investing criteria that reduce haram income to an acceptable level. However, additional steps are needed to further "cleanse" or "purify" this income.
To do this, Islamic scholars recommend that Muslim investors donate any income derived from riba or other haram sources to charity or to someone in need. To ensure there’s no residual benefit to the donor, these donations should be made anonymously.
The Amana Mutual Funds Trust
In 1986, Dr. Mirza approached Nick Kaiser to offer suitable alternatives for Muslims to invest in. The result was the first Amana Fund, the Amana Income Fund. 35 years later, Nick and Dr. Mirza remain committed, together, to continuing to bring these great products to market.
Today, Saturna Capital advises Amana Mutual Funds Trust. Quarterly, the funds are reviewed and approved by Amanie Advisors — a board of scholars and other Muslims. Our disciplined investment process creates cost- and tax-efficient investment vehicles that are a valuable addition to any portfolio.