Best Halal Stocks To Invest In UK & US (Top 20 List)
In this post, I will discuss the best halal stocks to invest in and also how to find them. You can choose to either simply automate the whole thing and trust a halal broker to it for you (pick the stocks for you), or, you can do it yourself and analyse each one to decide whether it is halal or haram. I will teach you how to easily find the halal stocks without having to look at its financials and balance sheets yourself (you probably wouldn't be reading this if you already know this!). I will show exactly how to do this and will also give you a list of the top 20 halal stocks in my opinion. I live in the UK so I will be talking from my perspective but this applies to US residents and other countries.
Halal Investing For Beginners: Automation
- International stocks.
- Emerging market stocks.
- Sukuk
- Gold
Wahed is a good choice for long term investment and they are certified by the "Shariah Review Beareu" based on criteria from a large Islamic organisation: the AAOIFI, plus they also ensure purification of the money. The general standards they follow are summarised below, for more details, check their website on their criteria.
"In brief, any portfolio cannot hold shares of a company that:
- Provides non-Islamic financial services and any other related interest services.
- Manufactures/sells products or services not approved by the Ethical Board (i.e. liquor, tobacco, gambling, pornography, weaponry etc).
- Has interest revenue exceeding a certain percentage of total revenue (usually 5%) - unless it is given to charity.
- Does not have a certain percentage of non-liquid assets
- Does not comply with certain debt ratios"
But here is the catch: as with other portfolio managers, Wahed charge a fee which is not small compared to other "non halal" companies. Their fees are 0.99% plus other market fees like exchange fees, etc so the total is 1.8%.
Other roboadvisors include ShariaPortfolio (USA) and WealthSimple (Canadian platform).
Doing It Yourself - Choosing Halal Stocks and ETFs [Free]
ETFs or Exchange Traded Funds offer you to invest in many shares at once and they usually follow a specific market. For exampe, thet might follow the S&P500 (the top 500 performing companies in stock exchanges in the US. An ETF is traded on the market as a single stock but when you invest in it, you are putting your money in all the companies included (the money is divided between them).
Zoya:
Probably the most commonly used app. You can search Zoya to get a rating whether a stock is Sharia compliant or not and it contains thousands of stocks. There is also a detailed report that you can get if you subscribe to become a member for a fee. Zoya also bases their analysis on the AAOIFI criteria.Example of detailed report - Islamicly:
Similar to Zoya although their free version offers fewer shares and you would need to pay to see all stocks. They also offer a detailed report assessing different aspects of each company "finanaica, operational, etc" as well as a discussion forum. They have a detailed page on the criteria they use. The user interface is slightly busier and less user friendly.Islamicly analysis of Microsoft stock - HalalInvestors
This is one of my favourite websites, run by Rakaan Kayali who also runs the Practical Islamic Finance youtube channel. Rakaan studied finance and offers a lot of advice as well as analysis of individual stocks on his channel and also his website Halalinvestors. He offers a unique perspective, is usually more careful and conservative when it comes to assessing for halalness. For example, he argues some of the standards used by other systems use arbitrary cut offs based on "qiyas" or deduction from situations from the life of the prophet and applying this to today's financial systems. The paid version of his site offers detailed insights and analysis of stock, going beyond just the standards.Halal investors report card (free version) - The last option is to look at each company's annual reports yourself and analyse their numbers like interest expense and interest income, etc but you will need to either have studied accounting or spent a great amount of time learning this. Some websites offer helpful analysis like SimplyWallStreet.
Let's say you have picked a stock, saw on Zoya that it is sharia compliant, do you go ahead and invest in it? No, you need to know if you are actually going to make some profit! There is a bit more work to do but hopefully not that complicated.
The business itself
- Do they sell a product/service that you've heard of or used?
- Is it an established company or a new one?
- Have they been mentioned in the news/social media recently? Use the free Yahoo Finance site and app to get all the latest news for specific shares and also get alerts. I use this one daily. Remember to take what so called "experts" say with a pinch of salt. Focus on the facts and ignore wild predictions or hyped opinions as many of them are biased.
More financial stuff
The stock is halal but:
- How is the company handling its debt?
- Do they have enough cash flow?
- What is they growth potential, their PE ration, etc
- How volatile is the share price
- Is there any recent insider trading?
Again you can use SimplyWallStreet and Yahoo! Finance to read experts analysis and news.
Beyond halalness: ESG ratings (environmental, social, governance)
This is about how comfortable you are investing in a company, even if the Islamic financial screen says it is halal to invest in them. For example:
- What is the business impact on the environment?
- Are they involved in any political issues, human rights abuses, etc? For example, Apple have been accused of using Uighur Muslims as forced labour.
- How does the company treat its employees and customers?
And so on. This, I can argue, is also related to halalness but basically also depends on you personally and how comfortable and willing are you to use them as an investment. Non-Muslims are also becoming interested in this and it is called "ethical or responsible investing".
Best Halal Stocks List [US & UK 2021]
- Adobe
- Microsoft
- Intel
- nVidia
- AMD
- ETSY
- Coursera
- Johnson & Johnson
- Tesla
- ExOne Co
- Upwork
- Teladoc
- DropBox
- Alphabet Inc (Google)
- Snowflake
- Unilever
- Shopify
- Abbott Labs
- Home Depot
- DuPont
- Also Crowstrike, ASML holding, Medtronics and many others.
Which App Should You Use For Halal Investing?
- Stocks not meeting halal criteria as above or companies that rely on haram business (e.g. alcohol, tobacco, pornography, etc).
- CFD.
- Leverages (anything you see with x2, x3 etc in the stock name.
- Options.
- Bonds: unfortunately most of them are haram. The Islamic alternative is Sukuk. Wahed Invest is the easiest way to access Sukuk.
Great post! Very informative and actionable content. Thanks for sharing
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