ISLAMIC INVESTMENT

Muslims who wish to follow the strict tenets of Islamic Shariah law in their financial and investing activities have a narrower universe of choices than those who are not followers of Shariah law. However, a study by Islamic Research and Training Institute, of the Islamic Development Bank (Saudi Arabia) found that performance was not hampered by the Shariah filters used to create approved lists.

The author of that study, Kahled A. Hussein, provided this historical note, “Until the 1970s, a great proportion of the Muslim community was not involved in any stock market investments due to Islamic prohibition of certain business activities. In the 1990s, a major breakthrough took place in religious rulings related to equity investment, and since then Islamic equity funds have started to operate.”

Islamic Investing Principles

Two major guiding principles of Islamic investing are: (1) no interest, and (2) social responsibility. The most immediately obvious result of implementing Islamic investment principles is the elimination of the entire Financial Sector from the portfolio

Dow Jones Islamic Index

For those Shariah restricted investors who wish to invest in U.S. stocks, Dow Jones maintains an index of compliant U.S. stocks. The investor can select individual companies from that list or invest in one of a small number of mutual funds that in turn invest in the companies in the Dow Jones Islamic Index.

Islamic practice requires review of an approved list of investments by a group of Shariah scholars. Dow Jones manages their index list through its Shariah Supervisory Board consisting of six scholars: 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) and Shaykh Dr. Mohd Daud Baker (Malaysia).