Re: Stocks and Islam
Prophet PBUH was a business man himself you think He made no profit?
But He(PBUH) **worked **for it. I never said gaining profit is haram. All i said is that the money gained by not working is Haram. In order for money/investment to be Halal one has to earn it, not just lay back and let the cash flow.
Therefore Stock Trading is Haram - since the stock holder is not working for the company, rather just investing into it.
Re: Stocks and Islam
Time locked interpertations of 'work' fail to appreciate or understand current workings of company capital.
When investors commit capital (buy stocks) they are basically investing into the companies prospective earnings. Company is a legal entity as defined by commercial law, in actual reality it is a composite of assets, liabilities and a capital base. It has a business model, board, management and employees. Management and employees may not be shareholders (owners) of the company, yet recieve compensation in the form of salaries, benefits and bonuses. Owners of the company are its shareholders who are willing to invest their capital which is then 'worked' or used to run the business.
Re: Stocks and Islam
as such stocks r not declared haraam by anyone....
not working for something and only investing does not make any business haraam....
i might have money and not know how to work so i give my money to some ppl to run a business for me and take part of the profit, while not involving myself it does not mean that its haraam....
when u deal with stocks of businesses that r by themselves involved in haraam, then its definitely wrong....
Re: Stocks and Islam
There are many, many scholars who allow trading in stocks, since it is simply a form of owning part of a business.
My dad has spent the past 2 decades heavily involved in the Islamic stock investments industry, and it has pretty complex shariah compiance guidelines. The main issue is that not all companies are halal to buy stock in.
Atthe bank my dad worked at, one of the 4 scholars overseeing their operations was Justice Mufti Mohammed Taqi Usman. His basic set of guidelines was:
The main business of the company must be Halaal (permissible) according to Shariah. So, a Muslim cannot invest in a company whose main business is Haraam, like the traditional banks, insurance companies, companies dealing in wines, etc.
If the main business is Halaal, but it is involved in borrowing money on Interest or placing its funds in an Interest bearing account a Muslim share-holder should raise his voice against this practice in the annual general meeting of the company.
When a Muslim share-holder receives a dividend he must ascertain that proportion of the profit of the company which has accrued on its interest-bearing accounts. Then a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakaat.
If all the assets of a company are in a liquid form and the company has not yet acquired any fixed assets or any stock for trade, then the sale and purchase of shares must be on their par value only.
If anyone of these conditions is contravened, the investment in a company is not permissible in the Shari'ah.
Re: Stocks and Islam
So according to you, it would be haraam for me to pay a struggling shop owner to buy half of his business and then take a proportionate share of his profits, unless I was actually working in the shop too?
How about if I inherited $500,000, set up a business, employed someone to run it on my behalf, then had no further dealings with the business other than lay back and let the profits flow into my wallet?
Stock ownership is nothing other than owning part of a business, whilst leaving the day-to-day running of the business in the hands of the employees working for you. Stock owners can once a year determine who should be hired to head the business on their behalf - the amount of influence they have on the decision is proportional to how much of the business they own.
Re: Stocks and Islam
Investing in stocks is not Haraam. You can ask any scholar and I have read from Mufti Ebrahim Desai that you can invest in the companies that you know are in Halal business.
Re: Stocks and Islam
I’m sorry, but you really need to educate yourself further on this issue. Ever heard of “sleeping partner” in a business? That is perfectly halal, no one has placed any restrictions on that.
Do you mean by investing in stocks you win “millions”?
How many people have you seen become “millionaire” by buy stocks for $1, $2, $5? I’m not talking about the price of stock here, but the actual amount of investment.
How many stocks you have seen grow ‘million times’? what about ‘thousands of times’? ‘hundreds’? Just curious to know.
Re: Stocks and Islam
itsme01,
House A - I physically build myself to rent it out.
House B - I get a contractor to build the house for me so that I can rent it out.
House C - I just buy a ready built house all paid for without any loans etc so that I can rent it out.
Now according to your logic, the income from houses B and C would be haraam, correct?
Re: Stocks and Islam
Informative posts mAd_ScIeNtIsT. But i am still a little confused.
In "gambling", "lottery" you lose ALL what you "invest", however in "stocks" you might lose a certain percentage but not ALL
Lets assume i agree with you, But What if I win Millions!, would that make the money gained from the winnings Halal>? umm NO.
i mean if i win millions in Lottery.
Re: Stocks and Islam
Do not assume. Doesn't matter if it is 1$ or 1 Million$, if you have morals you would give some to charity etc..
Re: Stocks and Islam
so you are saying that winning lottery would be Halal if i give some of it to charity?
Re: Stocks and Islam
[quote]
2. If the main business is Halaal, but it is involved in borrowing money on Interest or placing its funds in an Interest bearing account a Muslim share-holder should raise his voice against this practice in the annual general meeting of the company.
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If after voicing my concern, the company still continues to practice in riba, am I obligated to sell my shares? Do you know?
[quote]
3. When a Muslim share-holder receives a dividend he must ascertain that proportion of the profit of the company which has accrued on its interest-bearing accounts. Then a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakaat.
[/quote]
This holds true for investors who invest for dividend payments only. But what about those who invest (not speculate, mind you) banking on the appreciation of the stock price. Most stocks trade on forward P/E value, which is Price per share / Earnings per share. This "earning"is really the net income which has the interest income embedded into it. So, if the price per share has net income factored in, how do you discount that when you sell your stock?
[quote]
[/quote]
I guess this answers my previous query. So, capital appreciation of stock is haram?
As a sidenote, I agree with you with most of what you said with some reservations.
Also, someone saying that there is parallel between gambling and sotck investing doesnt really hold water because, in my opinion, Stock investment, unlike gambling, is not a zero-sum game and has value-added components.
In that respect, option trading is very much akin to gambling which, forall intents and purposes, is a zero-sum game.
Re: Stocks and Islam
Net: Different companies follow different fatwas on this issue. Taqi Usman’s fatwa is that your duty is merely limited to enjoining the good (ie protesting that the company is getting interest); but some scholars feel that if a company makes significant parts of its income from haraam banking activities then it must be avoided.
If you want more technical details on what makes an Islamic stock (hey.. I’m a tech manager, not a finance drone), check out the rule book for the Dow Jones Islamic Index
http://www.djindexes.com/mdsidx/downloads/imi_rulebook.pdf
A high level summary of the rules derived the the scholars used is:
The first step in constructing the Dow Jones Islamic Market Indexes is to exclude from the index universe any industry group (defined by the Industry Classification Benchmark) that represents an incompatible line of business. Companies classified in other industry groups also may be excluded if they are deemed to have a material ownership in or revenues from prohibited business activities.
Once companies with unacceptable primary business activities have been eliminated from the universe, the remaining stocks are tested according to three “filters” designed to remove those with unacceptable financial ratios. All the following must be less than 33%:
* Total debt divided by trailing 12-month average market capitalization.
* The sum of company's cash and interest-bearing securities divided by the trailing 12-month average market capitalization.
* Accounts receivable divided by the trailing 12-month average market capitalization.
That scholar board is:
Shaykh Abdul Sattar Abu Ghuddah Syria
Shaykh Justice Muhammad Taqi Usmani Pakistan
Shaykh Nizam Yaquby Bahrain
Shaykh Dr. Mohamed A. Elgari Saudi Arabia
Shaykh Yusuf Talal DeLorenzo United States
Shaykh Dr. Mohd Daud Baker Malaysia
Re: Stocks and Islam
May be you should spell out what your confusion is instead of just saying you are confused 
errr, did I not say that earlier that lottery is haram totally? What exactly is your question there?
Once again, you don’t have to be a WORKING partner in ANY business to share its profit/income.
Re: Stocks and Islam
You have learnt an incomplete lesson bro. It is totally halal to be a non-working partner in any (halal) business.
Re: Stocks and Islam
why is playing Lottery then Haram?
Re: Stocks and Islam
ZERO-SUM-GAME.
One wins at the loss of another.
Lottery, gambling, betting and option trading all fall within that category.
Re: Stocks and Islam
Above all reasoning, didn’t Allah say its haram? If going for reasoning, then there are more than one reasons for that not just “earning without working” . when you are playing lottery you are risking 100% of that money, your gain is usually 1000s time in case you “win”, you are not investing it in a “business”, you are not ‘partnering’ in a business etc. Also read response above by dope.
Re: Stocks and Islam
Assalaam ALeekum
Investing in stocks is highly risky business. Only few players(Pak)
control the market. Be careful.
Take Care