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Halal Stock Investing 101 Guide

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Stock investing is the bread and butter of pretty much any investment portfolio for a large part of your lifetime.

But you still don’t know exactly how to invest in stocks, or where to go when you are ready to invest, and how much you should allocate to stock investing. This is the guide for you.

We’ll cover 3 key ways to invest in stocks:

  1. DIY it
  2. Funds
  3. Robo-advisors

For a detailed explanation of shares & forex – read this articleFor general info on the stock market – read this.

1. DIY it:

Pick this if you want to choose and manage your own stock or funds.

This isn’t the best way for beginners, we would recommend funds or robo-advisors as explained below.

DIY requires a lot of work. You can practice stock investing in the real market with virtual money. Many platforms offer this, such as AJ Bell.

But if you invest DIY, consider the following points:

(a)  Choose the right broker for you

You can only buy stocks through a broker. They can be an individual or a company, who act as an intermediary between an investor and an exchange.

Here are four things to look out for in a broker:

  1. Reputation
  2. Charges
  3. Product range
  4. Ease of use

If you’re using large amounts, it’s best you use an ISA with someone like AJ Bell. This will protect you from Capital Gain Tax. Nice.

For smaller amounts, it’s best to use a low-cost broker like DeGiro or Trading212. This is because they’re very cheap and you don’t need to worry about capital gains tax as much (as you are investing small amounts you are unlikely to trigger the £12,300 capital gains tax limit for this tax year).

For investing in funds rather than stocks (as explained below) – we’d recommend AJ Bell.

(b)  Have an investment strategy

This is in terms of the stocks you pick and how you go about them. Our Halal Investing course is a good starting point.

(c)  Screen the stocks yourself

You don’t want your hard-earned halal money investing in haram products.

Apps like Zoya or Islamicly can help with this, however, they’re always just a starting point. You need to check yourself.

We have an article explaining the five key criteria that a company must pass in order to be considered a sharia-compliant halal investment.

If you’re seriously considering DIY – then check out our halal stock screener course.

(d)  You really care about investing

This type of investing is for the long term as it takes time to do well. Don’t rush it as you’ll just get burned.

If you want something short-term, consider other options e.g. fixed-income investments Sukuks. You can find these here.

2. Funds:

Pick this if you want to diversify in lots of stocks.

This is much easier than DIY.

Mutual funds allow you to purchase a large selection of stocks within one fund, in one transaction. This can be done through a broker.

You should pick a fund due to:

  1. Diversification benefit; and
  2. The readjustments that fund managers make.

It’s difficult to get these when you DIY as it’ll cost loads with the brokerage fees.

Some funds are haram, but there are Islamic ones out there. Thinking halal – pick a broker like AJ Bell or HL to invest in as they cover most Islamic funds.

We at IFG recommend AJ Bell as they offer tax-efficient wrappers for UK customers and because they have a wide-ranging basket of sharia-compliant funds to choose from too. You can also open a SIPP with them using this link.

You can compare some funds on our Halal Investment Platform.

3. Robo-advisors:

Pick this if you want someone else to manage your investment (for a fee).

This is by far the simplest way.

A company will ask you about your investment goals. They then will build you a portfolio designed to achieve those aims. You then leave it to them to manage it.

Some places to go include Wahed or in the USA Sharia portfolio, Aghaz etc. If you’re unsure, compare them all on our Halal Investment Platform.

You can open an account very quickly and for little money.

The upside of this is you’re saved all of the pain that DIY has.  These guys will often invest in the same funds you can invest in directly, but they also give you exposure to other things like gold, Sukuk etc. They’ll also rebalance your portfolio for you too.

The downfall is that they do charge a fee on top of the fund fees, so it’s not for free. To find out more about how to balance all this, check out our HIBP course, or to get started investing go to the HIP.


Some points to consider before investing:

  1. You can practice stock investing on the real market with virtual money – Trading 212 has this.
  2. Whatever way you choose, only invest what you can afford to lose.
  3. Remember to think long-term – you won’t get rich overnight.
  4. The easiest way to get started is through a fund or a robo-advisor.
  5. Monitor your stock portfolio. This doesn’t mean sit there and watch it tick but do check regularly.
  6. Diversify your portfolio – fixed-income investments are safer and easier to manage than stocks. We have an explanation of what they are here.

Haider SaleemHaider is an experienced BBC-trained award-winning journalist who also works in the legal profession. He studied his undergraduate at the University of Manchester which included an Erasmus+ exchange program at the University of Amsterdam. He’s also completed the GDL and LPC postgraduate courses.

Saleem, Haider. (2020, December 29). Halal Stock Investing 101 Guide. Retrieved from https://www.islamicfinanceguru.com/general/halal-stock-investing-101-guide/

The views and opinions expressed in this article are the author’s own and does not necessarily reflect Alfafaa’s editorial views

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