Islamic Investing: Building Wealth the Halal Way
Investing is a powerful tool to build wealth and create financial security, but for Muslims, ensuring investments align with Islamic principles is crucial. Islamic investing follows Shariah law, avoiding businesses involved in unethical industries like alcohol, gambling, or interest-based financial services. One of the best ways to invest Islamically is through Shariah-compliant ETFs (Exchange-Traded Funds), which can provide consistent dividends and long-term growth.
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What Are ETFs?
ETFs are collections of stocks or other securities pooled together, allowing investors to diversify their portfolios with a single investment. Shariah-compliant ETFs exclude businesses that generate revenue from non-halal activities, focusing instead on permissible industries.
- How They Work: ETFs track specific indices, such as the S&P 500 or real estate markets, to give investors exposure to various sectors without needing to pick individual stocks.
- Dividend Potential: Many ETFs pay dividends quarterly or monthly, depending on their focus.
Shariah-Compliant ETFs in the US
- Vanguard Real Estate ETF (VNQ):
- Focus: Tracks real estate investment trusts (REITs) focusing on residential, industrial, and commercial properties.
- Dividend Yield: ~3-4% annually.
- Fidelity Real Estate Index ETF (FREL):
- Focus: Diversified exposure to US real estate investments.
- Dividend Yield: ~2.5-4%.
- Shariah-Compliant S&P 500 ETFs:
- Offered by reputable firms, these funds track the performance of the largest US companies while adhering to Islamic principles.
Platforms to Use in the US:
- Vanguard
- Fidelity
- Charles Schwab
- Robinhood
- Well-known banks like Chase or Bank of America also offer investment guidance.
Shariah-Compliant ETFs in Europe
- VanEck Global Real Estate UCITS ETF:
- Focus: Invests in global real estate companies and REITs with halal-compliant practices.
- Dividend Yield: ~2-4% annually.
- SP Funds S&P 500 Shariah ETF:
- Focus: Tracks the S&P 500, excluding companies involved in non-halal activities.
- Dividend Yield: ~1.5-3%.
Reliable Platforms in Europe:
- Bolero: A trusted platform for ETF and stock investing.
- Degiro: Offers low-cost access to a wide range of ETFs.
- Curvo: Simplifies investing for beginners with automated portfolios.
- Private Banks: Delen Private Bank and others can help create long-term, halal investment strategies.
Potential Scenarios for Passive Income
Growth Scenarios for $200 Monthly Investment
Using a Shariah-compliant ETF tracking the S&P 500, here’s how your portfolio could grow:
10 Years (10% Annual Growth):
- Total Contributions: $24,000
- Portfolio Value: ~$38,000
- Estimated Annual Dividend (3% yield): ~$1,140
20 Years (10% Annual Growth):
- Total Contributions: $48,000
- Portfolio Value: ~$152,000
- Estimated Annual Dividend (3% yield): ~$4,560
30 Years (10% Annual Growth):
- Total Contributions: $72,000
- Portfolio Value: ~$542,000
- Estimated Annual Dividend (3% yield): ~$16,260
Benefits of Islamic Investing
- Ethical Returns: Your investments align with your faith and values.
- Passive Income: Dividend payouts can grow into a reliable income stream.
- Generational Wealth: By reinvesting dividends, you can create wealth that benefits your family for years to come.
Building Wealth the Halal Way
Islamic investing through Shariah-compliant ETFs offers a path to financial freedom while adhering to Islamic principles. Whether you’re in the US or Europe, platforms like Vanguard, Bolero, and Degiro make it easy to get started. By investing consistently and letting your money grow over time, you can achieve passive income that supports your lifestyle and creates generational wealth.
Remember, patience is key. It takes time for investments to grow, but with discipline and a long-term vision, your portfolio can become a powerful source of income for you and your future generations. Start today and take the first step toward financial freedom!
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