How Geopolitics Can Impact Halal Investment Returns
As the world continues to shift and change, the commercial environment is unsurprisingly affected. Investing can be a tricky proposition, and this is especially true when it comes to Halal investments, which need to adhere to strict Islamic guidelines and laws. Particularly, geopolitics can have a great impact on the returns associated with Halal investments in many ways.
What is Geopolitical Risk?
Geopolitical risk refers to risks posed by geopolitical events and disturbances in international relations, such as wars and international conflicts, dangerous political climates, and unstable governing structures. These events can cause financial markets to fluctuate dramatically, resulting in both losses and gains.
Understanding the Risks
Geopolitical risk is particularly potent in the Middle East and other regions where the relationship between the United States and other countries is precarious. In these cases, an event or political change can suddenly cause stock prices to rise or fall, which will directly affect the returns of Halal investments.
For example, investor sentiment was affected in 2019 when the United States and Iran began increasingly hostile exchanges and economic sanctions were placed on Iran. This resulted in decreased investments from the United States, causing a steep drop in Halal investments. Beyond this, U.S.-related interests abroad can affect Halal investments if the events disrupt the political landscape.
Navigating the Risks
Given the unpredictable nature of geopolitics, it can be difficult to make informed decisions when it comes to Halal investments. Some ways investors can make wise decisions despite the risks include:
- Keeping up to date on global political events and international relations.
- Consistently monitoring foreign markets and stock prices.
- Utilizing stop loss orders to limit potential losses.
- Diversifying investments to minimize risk.
- Researching the country’s economic background and political system.
The Bottom Line
In many ways, geopolitics can drastically affect the returns associated with Halal investments. Understanding the risks associated with these investments and making informed decisions can help investors to make wise investments and protect their profits.