Strategies for Building a Diversified Halal Investment Portfolio
Every year, thousands of Muslims across the world search for ways to better manage their finances in accordance with Islamic law. For many, this means looking into investing with a focus on sharia-compliant or 'halal' options. Building a diversified Halal investment portfolio can be a great way to ensure that your funds are ethically invested while still growing with the goal of generating future returns. Here, we’ll look at some of the key strategies that can help you to create and manage a successful Halal investment portfolio.
1. Start with a Great Financial Plan
Before you start investing, it’s important to create a detailed financial plan. This should include setting realistic goals and what you want to achieve financially in the short, medium and long term. After you take into account your current financial situation, income, commitments, aspirations and overall attitude to risk, it’s far easier to figure out the best way to invest.
2. Develop a Diversified Portfolio
One of the more important aspects of investing successfully is diversification of your assets. When building a diversified Halal portfolio, this means investing in different assets with different risk profiles, such as stocks, bonds, funds, real estate, cash and commodities. Having a good mix of assets in your portfolio will help to reduce risk and keep you protected should there be any trouble with one particular asset.
3. Consider Halal Investing Platforms
Halal investing has seen a huge growth in recent years, and there are now several online platforms that provide sharia-compliant investments and invest in pre-screened companies that meet certain criteria. When looking for a halal investing platform, it’s vital to make sure the company is regulated, transparent and has solid customer service.
4. Invest in Collectibles
The purchase of tangible assets such as art, jewellery, antiques or collectibles can be an attractive option for investors who prefer a more hands-on approach. However, investing in these assets can be risky as there is no real way to accurately value each item. You should also make sure to only invest in items that meet sharia-compliant criteria.
5. Don’t Overlook Cash Options
Having a secure cash balance in your portfolio can work to your advantage should there be a dramatic downturn in the market. It can also help to protect your funds from any unpredictable events. Keeping some of your capital in a savings or money market account can be a great way of protecting your funds, as well as providing some liquidity for other investments.
6. Invest in Real Estate
Real estate has long been a popular option for Muslims investing in halal instruments. This is an especially attractive option for those who don’t want to deal with the volatility of the stock market, and an investment in rental properties can generate regular income for investors.
7. Research Carefully
Before investing in anything, it’s always important to do your research and understand the risks involved. Understanding the company you’re investing in, their business models and the history of the industry can help you to make informed decisions and be confident when making investments.
8. Monitor Your Investment Performance
Finally, your portfolio should be regularly monitored and adjusted as and when necessary. This means revisiting goals, researching and re-evaluating investments in order to make sure they are still in line with your goals and Sharia-compliant.
Creating and managing a successful Halal investment portfolio can take time, however, following these strategies can help you to get off to the right start in planning for your financial future.