Sharia based personal investment
Sharia based investments are available in India and are within the reach of individual investors. Infact India holds the largest number of sharia compliant (Halal) companies, which are publicly listed and available on BSE/NSE.
How to bank within the available facilities in India?
Islamic banking facility is not available in India, where you could maintain zero interest savings bank account. Banking is an essential requirement for an individual be its an employee, businessman or pensioner. As Islamic banking facility is not available, you are left with two choices; One is to write to the bank not to credit any interest component to your account or if you are credited interest then compute the same using the bank statement and give it away on charity. By choice you have the option not to open deposits which give fixed interest component like Fixed Deposits.
Keep track of your wealth
The 4th pillar of Islam ‘Zakat” deals with the financial obligation of an individual towards the society. Unless you keep account of your money, it’s difficult to estimate how much you owe as ‘Zakat’. If you are an individual interested to follow sharia investment principles, then sharia prescribes you to keep account of your assets, your net worth, your income and your expenses. Keeping account of your wealth is thereby a necessity.
Sharia Investment Avenues
Let’s take a glimpse on the various financial products or investments which can be sharia compliant s well.
Investment in Sharia Compliant Mutual fund
In India you have the opportunity to invest in sharia compliant mutual funds. There are currently three such funds which Sharia friendly namely Tata Ethical Fund, launched way back in 1996 and the other two are Taurus Ethical Fund and R*Shares Shariah BeES.
Investment in Share Market
Investment in shares of sharia compliant public limited companies listed in BSE/NSE is one of available investment opportunity.
Basically, you need follow the ‘value investing’ approach to invest in Stock Market. Here you choose a company which is sharia compliant, then study the company in detail and then buy the share with the intent to be a long term investor.
In order to avoid speculation (Gharar) and to follow the principle that ‘you cannot sell what you do not own’ speculative trading in any form should be avoided. The following forms of speculative trading namely; swing-trading, margin-trading (involves riba), day-trading, short-selling or trading in derivatives should be avoided.
If you are unable to analyse and invest own your own then, there are several portfolio management companies, who will construct a sharia compliant portfolio for you.
Will discuss in detail, in upcoming articles about investment in shares.
Investment in Precious Metal
You can invest in Gold, Silver, Platinum etc., which in recent two decades have given decent returns. Also, these investments are considered to be good hedge against inflation.
Investment in Real Estate
Real estate has been one of the traditionally followed investment option as a sharia compliant investment. If the recent trend of speculative investment in real estate is kept out of this context then it’s one among the best investment option available.
Be it residential or commercial real estate has been quite rewarding. The opportunity for capital appreciation and rental yield makes it’s an investment worth enough.
Major drawback for real estate investment are; the investment amount is high, liquidity issue (ease of disposing), legal clearance risk and maintenance.
Real estate investment in one form or the other is the need of the hour for a sharia compliant retirement income. Will discuss on this topic in upcoming article.
Investment as a Private Investor of capital
On an individual level if you are comfortable enough, you may seek the opportunity to invest in select business ventures by taking a share in it. This is not highly recommended as the nitty gritties involved beyond your comprehension.
Recently came across a consulting firm, formed by some eminent professionals based out of Bengaluru (India) providing professional service for individual investors to participate in existing sharia complaint companies as shareholding investors.
Some remarkable developments are happening for the individual sharia based investors, in the recent times. Its more for us to seek and encourage these developments and guide them in the right path.