Ramadan is a time for religious study and contemplation. One thing that many Muslims think about is their finances.
A 2016 study examined financial investors during Ramadan. It found that Muslim investors were happier during the month, leading them to buy more stocks. In six Muslim-majority countries, the annualised returns during Ramadan far exceeded those of any other month.
With the boost to morale that Ramadan provides, you should consider halal investing right now. But many people don’t know where to start. They don’t even know if there are halal ways to invest their finances.
Find out those ways, and you can increase your profits and help your community. Here is your guide to halal investing.
1. Give Zakat
Zakat is the obligation to give a portion of your wealth to charity. It is one of the five pillars of Islam and serves as one of the holiest things you can do. Most Muslims give 2.5 per cent of their total wealth, but you can give more if you can afford it.
You can give money directly to the poor. You can hand them cash and buy them meals or a place to live. You can also give money to a homeless shelter or charity for the impoverished.
Many Muslims like to give zakat to organizations that advocate for refugees. The United Nations Refugee Agency has a specific program so Muslims can dedicate their zakat to them. If you want to focus on Australian refugees, you can give to AusRelief.
If you want to give to organizations for disease research, you can do that. You can choose to give small donations to several organizations, or you can give one donation at once.
In addition to being a moral good, zakat has benefited from an investment standpoint. You can claim a tax deduction for donations, though you must donate to a deductible gift recipient (DGR). Do some research on your organization to make sure they are a DGR.
You can give zakat during any part of the year. Ramadan is sometimes called “the month of zakat” because rewards for good deeds are multiplied during the month. Try to donate as much as possible during Ramadan, but you can wait until afterward.
Some people give an extra donation toward the end of the month called Zakat al-Fitr. You give a small amount of money or food to the poor. It is a requirement for many denominations, but it is independent of zakat.
2. Become More Conscious Of Ethics
The purpose of Ramadan is to cleanse the body and mind. The person should turn inward, reflecting on how they have done wrong. They should then keep from making the same mistakes again.
In that vein, you should become more conscious of financial ethics. Your wealth comes from labour and resources that could be immoral.
Riba refers to wealth that is developed through interest. It is immoral because it produces inequality and requires no work to produce.
Gharar refers to deceptive financial interactions. Engaging in speculation and purchasing futures is gharar because you cannot know what will happen. It is deceptive to make money off of results that may not occur.
Many financial activities are ethical. You can invest in real estate and businesses. You can buy and sell hard assets like gold and silver.
Study Islamic law and find out what practices are ethical. Talk to a religious scholar and a financial advisor trained in halal investing.
Check your portfolio and see if you are engaged in any unethical practices. If you are, desist from those practices right away. Consider donating to offset the money you made from them.
Many Islamic scholars disagree over what is ethical or not. For instance, there is an ongoing debate over whether insurance is halal. Talk to several different experts and come to your own interpretation of ethical investing.
3. Avoid Sin
Nearly all Islamic scholars are clear on what is sinful. You should not invest in the production of haram animals like pigs. You should also not invest in alcohol or drug production, even if Muslims work for a particular business.
Any involvement in gambling is forbidden. If you gamble and win money, you acquire it through luck, not honest work. Investing in gambling companies causes other people to develop an addiction and lose their money.
You should not invest in weapons manufacturing or military funding—Sharia-compliant investing respects the sacred nature of life, which weapons and the military defy.
Pornography and adult entertainment are sinful as they distract the body and mind. You should invest in a company that uses sexual images in advertising, even if promoting non-sexual products.
Check your financial portfolio, including your superannuation. If you notice any investments in sinful activities, shift your money toward halal ways to invest. Find halal stocks and Muslim-run organizations that follow ethical practices.
4. Help the Community
It is important to give money to your community. But it is also important to contribute your time and energy to those around you.
If you have some skill, offer it. Fix your neighbor’s car or roof for them without asking for money.
Many community organizations are looking for tutors or assistant teachers. If you have an advanced degree, offer yourself to teach.
Contribute to a food bank or soup kitchen. Buy food to stock the shelves, then set aside some time to clean the grounds and serve patrons.
Get creative. Painting a mural can beautify a space and contribute to your neighborhood’s culture. If you have a property overlooking a public area, paint one of its walls.
Use your time volunteering for others to make connections in your community. You never know when someone has an investment or job opportunity for you.
But don’t call attention to yourself. Ask others to pay your good deeds forward rather than rewarding you. It encourages others to volunteer in their own ways.
Even small deeds can go a long way. Picking up something that someone dropped helps a person save time and energy. Take every opportunity you can to do something nice for someone else, especially during holy times like Ramadan.
5. Reflect On Your Finances
It is important to keep an eye on your finances. You should inspect them to see that all of your financial activities are ethical.
But you should also inspect them to make sure that everything is productive. If a stock is losing money, sell it.
Make sure you have plenty of savings for any financial troubles you may encounter. Many financial experts advise that you should have at least six months of expenses saved away. This is money in the event you lose your job or have a personal emergency.
You should save for retirement even if you are young. After you retire, you will need two-thirds of your pre-retirement income to live a happy life.
Many people think that the super and retirement pension will provide enough for them to live off of. But men aged 65 today can expect to live another 20 years. They need more money than what their pension gives them.
You can pursue several means to grow your super. You can make voluntary contributions, which is a good option for self-employed workers. You can contribute up to 100,000 dollars after taxes every year to your super.
You can maintain a halal super. A balanced super combines income and capital growth while avoiding unethical investments. You can also pursue a conservative super to focus on medium-term investments that grow your income level.
6. Stay Disciplined
You have to develop discipline during Ramadan. It is hard to avoid eating or drinking during the day. But you must remain focused and centred, accomplishing your work before sundown.
The same principle applies to your finances. It takes time to grow your super and financial portfolio. Many people feel the urge to make risky investments to get rich quick.
Avoid this temptation. Focus on diversifying your portfolio, so you make money from many different sources. You should have sources that give you money in the short term, but you should also look to the future.
Maintain your career trajectory, seeking promotions when you can. As you make money, talk to financial experts on how you can use that money responsibly.
Staying disciplined does not mean working without a break. You need to remain disciplined about your health and social lives.
Get at least eight hours of sleep every night. Take at least one day off if you are feeling sick and go to a doctor’s appointment. Spend your free time with family and friends.
How to Engage In Halal Investing
You can engage in halal investing through several activities. You should give zakat during Ramadan to local and national organizations. You can study financial ethics and remove your investments in sinful lines of work.
You should try volunteering in your local community. Take some time to examine your portfolio and save money for retirement. Remain disciplined by building your career and taking some personal time for yourself.
Turn to financial experts who know halal methods. Crescent Wealth is Australia’s leading halal investment fund. Contact us today.
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Ethical Finance and Innovation
Dr. Sayd Farook is the Executive Director of Crescent Foundation. He is Group Chief Operating Officer of Crescent Wealth and Managing Director of Crescent Finance. He previously served as Advisor to the Executive Office of the Vice President and Prime Minister of the UAE and Ruler of Dubai. In this capacity, he envisioned and executed strategic / transformation initiatives for Dubai and the UAE. Prior to that, he was the Global Head Islamic Capital Markets at Thomson Reuters, where he advised and served large corporates, multilaterals and governments in the Middle East, North Africa and South East Asia.