Halal Investing for Beginners

Why Every Muslim Should Invest

Many Muslims avoid investing because they fear it might be haram. This leads to keeping wealth in cash — which actually violates another Islamic principle: you should not allow wealth to sit idle (it should work for you and for society). Islam encourages legitimate wealth creation and business.

The key is not whether to invest, but how to invest in a way that complies with Islamic law. This guide gives you everything you need to start.

The 3 Things to Avoid in Halal Investing

1. Riba (interest): No bonds, bank stocks, or interest-bearing savings accounts. See our complete guide to riba.
2. Maysir (gambling): No lottery, casino stocks, sports betting, or highly speculative instruments.
3. Gharar (excessive uncertainty): Avoid derivatives, futures, and complex financial instruments with unknowable outcomes.

Additionally, avoid industries that produce haram products: alcohol, tobacco, pork, weapons, adult entertainment.

Step 1: Build an Emergency Fund First

Before investing, build 3-6 months of expenses in an accessible savings account. Use an Islamic bank (Al Rayan, Gatehouse, or similar) that offers Sharia-compliant savings using profit-sharing (mudarabah) instead of interest.

Step 2: Choose a Halal Brokerage

You need a brokerage account to buy stocks and ETFs. Most conventional brokers (Fidelity, Schwab, Vanguard) are fine as long as you select halal assets. The broker itself doesn't need to be Islamic.

For a more guided halal experience:

• Wahed Invest: First fully halal robo-advisor. Global, easy to use, small minimum.
• Islamicly: App with built-in Sharia screening
• Zoya: Best for US investors doing their own stock selection

Step 3: Start with Halal ETFs

For beginners, halal ETFs are the easiest starting point. You get diversification without having to screen each stock yourself:

• SPUS — S&P 500 Sharia-screened. Best for US equity exposure.
• HLAL — Wahed's Sharia US equity ETF. Another excellent option.
• GLD or IAU — Physical gold ETF. Classic Islamic store of value.
• SPRE — Sukuk (Islamic bond) ETF for fixed income.

Read our full guide to the best halal ETFs for detailed analysis.

Step 4: Learn Individual Stock Screening

Once you're comfortable with ETFs, you may want to select individual stocks. Use our free halal checker to screen any stock instantly.

Generally halal large-cap stocks include: Apple (AAPL), Microsoft (MSFT), NVIDIA (NVDA), Tesla (TSLA), and hundreds more. Use our guide on what makes a stock halal to understand the methodology.

Step 5: Diversify Your Halal Portfolio

A good beginner halal portfolio might look like:

• 50-60% — Sharia-screened US equities (SPUS or HLAL)
• 20-25% — International halal equities (ISWD or UMMA)
• 10-15% — Physical gold (GLD or IAU)
• 5-10% — Sukuk (SPRE) for stability

Step 6: Remember Zakat

Once your investments exceed the nisab (87.48g gold equivalent) and you've held them for a full lunar year (hawl), you owe 2.5% zakat on the market value. Keep this in your financial planning. See our complete guide to zakat on investments.

Step 7: Purify Dividends

Most halal stocks earn a small amount of interest income. You must "purify" this by donating the equivalent percentage of your dividends to charity. Zoya app calculates this automatically.

Common Beginner Mistakes to Avoid

• ❌ Keeping all wealth in cash "to avoid haram" — wealth should work
• ❌ Investing in bonds or savings accounts that pay interest
• ❌ Investing in index funds (SPY, VOO) without checking they're Sharia-screened
• ❌ Day trading or speculating heavily — can become maysir
• ❌ Forgetting to pay zakat on investments

The Bottom Line

Halal investing is not only possible — it's increasingly accessible and competitive with conventional investing. Start simple with SPUS and gold ETFs, use tools to screen individual stocks, and remember your zakat obligations. May Allah bless your wealth and make it grow righteously.