Our Halal Investment Approach
As-Salamu alaykum
At Assad Wealth Management, our mission is to provide comprehensive financial advice that will help you grow and sustain your wealth. With a focus on high-net worth individuals and families, we provide personalized solutions and tailor our approach to every client’s unique circumstance and objectives. For our Muslim community, our specialized team will ensure that your investment plan is Shariah compliant and aligned with your values, so you can achieve your goals with confidence and peace of mind.
What is halal investment planning?
Halal investment planning is a concept in Islamic finance that incorporates the investment process in a sharia-compliant manner (Islamic law). It is founded on the risk-sharing principle, which states that any profit or loss generated by a transaction must be shared by both parties.
This method produces more equitable results than traditional interest-based agreements, in which one party carries all of the risk. Investors and financial institutions must act in good faith, with equality and fairness as guiding principles in halal investment planning.
What are the key points of halal investing?
Halal investing prohibits investments that involve interest and usury. It seeks to minimize as much as possible speculation, vagueness and ambiguity. Lastly, products and services that Muslims are not allowed to consume or use such as: Alcohol, gambling, tobacco products, drugs, pork products, and pornography to name a few.
What is the risk involved in Halal Investments?
Almost every investment, whether Shariah compliant or not, carries a level of risk. Therefore, it's critical to understand the approaches for measuring risk associated with every investment.
We will assist you in determining your risk profile, which will factor into the structure of your investment portfolio that has been designed to achieve long-term growth.
How do we ensure your investments are Halal?
For an investment to be considered halal, it must be in equity instead of debt; investing in equity means having partial ownership by buying shares of the company. So rather than the investor giving a loan and getting paid interest regardless of how the company does, with equity, the investor shares in the profit if the company does well and shares in the losses if it does poorly.
All of our Halal Investments are screened by sector and by accounting to ensure your investment plan reflects your principles.
Level One - Core Business
Sector-Based Screens
Business activities related to the following are excluded:
Advertising
Advertisers of pork, alcohol, gambling, tobacco and all other non-Islamic activities
Advertising means and modes which contravene the tenets of Islam
Media & Entertainment
Producers, distributors and broadcasters of music, movies, television shows and musical radio shows
Cinema operators Exceptions:
News Channels
Sports Channels
Children’s Channels
Educational Channels
Alcohol
Financials, except:
Islamic Banks
Islamic Financial Institutions
Islamic Insurance Companies
Islamic Financials companies having:
Shariah Committee to supervise all activities
All products are Islamic
All investments of the company are Islamic
Passes accounting-based screens
Gambling
Pork related activities
Pornography
Tobacco
Weapon Manufacturers
After removing companies with non-compliant business activities, the remaining companies are examined for compliance with certain financial ratios. Three areas of focus are leverage, cash, and the share of revenues derived from non-compliant activities. All of these are subject to evaluation on an ongoing basis.
Level Two - Accounting
Accounting-Based Screens
During the selection process, each company’s latest financial statement is reviewed to ensure that the company is not involved in any non-Shariah compliant activities, regardless of whether the latest statement is a quarterly, semi-annual or annual statement. Those that are found to be non-compliant are screened out.
Leverage Compliance - This is measured as:
Debt / Market Value of Equity (36-month average) < 33 %
Cash Compliance - Certain rules related to cash holdings must be met. These are:
Accounts Receivables / Market value of Equity (36-month average) < 49 %
(Cash + Interest Bearing Securities) / Market value of Equity (36-month average) < 33%
Revenue Share from Non-Compliant Activities - In certain cases, revenues from non-compliant activities can be tolerated, if they comply with the following threshold:
(Non-Permissible Income other than Interest Income) / Revenue < 5%
Dividend Purification Ratio - This ratio is provided to investors for purification purposes, it is calculated as:
Dividends * (Non-Permissible Revenue / Total Revenue)
halal investing EXPERTS
We have relationships with speakers and authors who have the knowledge and experience to address Shariah-compliant investing.
Views and opinions of 3rd party individuals or firms may not be shared by IG Wealth Management. Reference to specific 3rd party individuals or firms do not constitute endorsement or recommendation by Hash Assad or IG Wealth Management.
