Is it good to grow your money?

Some Muslims feel investing is less clean than working. It is not. Allah has made trade halal, and made riba (interest) haram¹. Putting your money into a halal business so it grows is a kind of trade.

• Nabi ﷺ said: when a Muslim plants a tree or sows a seed, and a bird, a person or an animal eats from it, it counts as charity for him². Money put to work feeds people and makes jobs.
• The prophet Yusuf planned for the future. He told the people to farm for seven years and store what they harvested, eating only a little. Seven hard years would come after³.
• A man asked Nabi ﷺ if he should leave his camel untied and trust Allah. He said: tie it, and trust Allah⁴. Planning does not mean you do not trust Allah.

The orphan's money

Allah says: do not hand your wealth to people who cannot manage it, wealth which Allah made a support for you, but provide for them from it⁵. The Arabic actually says provide for them "in it", not "from it". Many scholars who explain the Quran say this hints at something. A guardian should put the orphan's money to work, so the orphan lives on the profit, not on the money itself.

• There is a famous hadith: trade with the orphan's money so that zakat does not eat it up. It is in Tirmidhi, but its chain back to Nabi ﷺ is weak. So we do not use it as proof.
• Scholars report the same advice from Umar ibn al-Khattab. They agree a guardian may invest an orphan's money in safe, halal ways. The same is true of your own savings. Because of zakat and rising prices, money that sits still slowly shrinks.

But do not let money take over your heart

Nabi ﷺ said: this wealth is green and sweet. Whoever takes it without greed is blessed in it. Whoever takes it with greed is not blessed in it. He is like someone who eats and is never full⁶. Invest to look after your family and to do good, not to chase more and more.

What is a share?

A share (or stock) is a small part of a company. If a company has a million shares and you own one, you own one millionth of the business: its shops, its machines and its profits.

• You earn from a dividend (part of the profit, paid to the owners). Or you earn by selling the share for more than you paid.
• You also share the risk. The share price can fall, even to nothing. This shared risk is what makes the profit halal. With interest, the lender is promised a profit whatever happens.
• Because you own part of the business, the business itself must be halal. Owning shares in a brewery means owning part of a brewery.

So almost all scholars today say owning shares is allowed as a basic rule. The real question is: which company? To answer it, scholars use two checks, called screens.

For the basic rules of riba, see What riba is. For running your own business or a partnership, see Partnerships and running a business.

Check 1: what does the company do?

First, look at the company's main work. If its main work is haram, its shares are haram. Common examples:

• Alcohol: making it, or mainly selling it.
• Pork and other haram meat products.
• Gambling: casinos, betting and lottery companies.
• Normal banks, lenders and insurers, whose main business is interest.
• Adult content: pornography and businesses linked to it.
• Tobacco. Many screens also leave out weapons and some kinds of entertainment, like music and film studios. Here screens and scholars differ.

To learn why gambling and dishonest trade are haram, see Honest dealing, gambling and work.

What if a company is mostly halal, with a small haram part?

Most big companies are mixed. A supermarket sells some alcohol. A tech company earns a little interest on its cash. Scholars give two views:

• Most scholars and Islamic finance bodies today: you may own shares in a company whose main work is halal, if the haram part of its income is very small, usually under 5 percent. You then give away that small part of your profit. Their reason is need: almost no big company is fully clean.
• Other scholars: only own companies with no haram income at all. Even a small haram part is still haram, and you own part of it.

Both views are held by real scholars. Follow a scholar you trust.

Not haram, though some people worry about them: profit when a share price rises (selling for more than you paid is trade, not riba), and paying a fair fee to an app, a fund or an adviser.

Check 2: how much interest is in the company's money?

A halal business can still be full of interest. It may have huge interest loans, or huge amounts of cash in interest accounts. So most screens also check the company's accounts. The usual limits are:

• Screens use slightly different numbers. That is normal. The numbers are the scholars' best effort to judge what counts as "small".
• Many scholars point to a hadith. Nabi ﷺ told Sa'd he could give a third of his wealth in his will, and said: a third, and a third is a lot¹⁰. From this they took a third as the line between "a little" and "a lot" in money matters.
• A company can pass this year and fail next year. Good screens check again every few months. If a share you own stops passing, scholars say sell it within a reasonable time.

Scholars differ on this check too

• Most scholars and Islamic finance bodies today accept these limits. You are buying a halal business, not its loans. And a small mix that is hard to avoid is forgiven.
• Some scholars say you cannot own any company that knowingly borrows or lends with interest, however small. Nabi ﷺ cursed the one who takes interest, the one who pays it, the one who writes it down and the two witnesses¹¹. An owner has a share in that.

Both views are held by real scholars. Follow the one your scholar follows. Do not look down on people who follow the other.

How do you clean out a small haram part?

Say you own shares in a company that passed both checks. A small part of its income may still be haram, usually interest. Most scholars who allow these shares say you must clean your profit. You do this by giving the haram part away.

How it works

• Find out what percent of the company's income is haram. Many screening apps and fund reports show this number.
• Take that percent of the dividends you got. For example, if 3 percent of the company's income is haram and you got 100 in dividends, give away 3.
• Give it to the poor or to something that helps the public. Do not use it for your own bills. It is cleaning, not charity: you give it away to get rid of it, not hoping for reward. Allah is good and accepts only what is good¹².

Profit from selling shares: many scholars say clean only the dividends, because a rising price comes from the value of the business. Others say clean the gain from selling too, to be safe.

This cleaning is not zakat. Do both. For haram money you earned before you knew the rule, see Doubtful things, need and mistakes.

Are funds, ETFs, bonds and sukuk halal?

Most people buy a fund. A fund is one product that holds many shares, so the risk is spread out.

• An index fund simply buys every company on a list, like the biggest companies in a country. A normal index fund will include banks, alcohol companies and others that fail the checks. So almost all scholars say a normal index fund is not halal.
• An ETF (exchange traded fund) is a fund you buy and sell like a share. It is halal only if what it holds is halal.
• Halal (Islamic) index funds and ETFs exist. They hold only companies that pass both checks, and a board of scholars checks them. Many tell you each year how much to give away to clean your profit. Still ask who checks them.

Bonds: a loan with interest

A normal bond is a loan. You lend money to a government or a company. It pays you fixed interest, then gives your money back. This is riba, so scholars agree normal bonds are haram. Many "balanced" or "safe" funds and pensions are partly made of bonds.

Sukuk: the Islamic choice instead

Sukuk (often called Islamic bonds) are certificates that make you part-owner of a real asset or project, like a building, a road or a lease. Your profit comes from that thing, like rent. It does not come from interest on a loan.

• Most scholars allow sukuk that are really backed by real things and share real risk.
• Some scholars warn that certain sukuk work just like a bond. They promise a return and promise to buy back at full price, so they are close to interest. Others accept them. Check that a trusted board of scholars approves it.

For banks and savings accounts, see Banks, savings and Islamic banks.

Is day trading allowed?

Investing means buying part of good businesses and keeping them for years, so you share in their growth. Day trading means buying and selling many times a day or a week, trying to win from small price moves.

• Buying and selling halal shares that you really own is trade. So most scholars say day trading is not haram in itself, as long as the shares are halal and you do not use the tools in the next section.
• But most scholars strongly warn against it. Most day traders lose money. It is often less like owning a business and more like guessing which way a number will move. It can become a habit that looks and feels like gambling¹³.
• Nabi ﷺ said: if the son of Adam had a valley full of gold, he would want two¹⁴. If the market fills your mind in salah or steals your sleep, step back.

Signs it has become gambling: you only watch the price and do not care what the company does. You trade for the thrill and try to win back what you lost. You use borrowed money. Or you risk money your family needs.

The slow way is the sunnah way. Earn honestly, spend wisely, and put what is left into halal businesses for many years. For crypto and other kinds of trading, see Crypto, trading and new kinds of money.

What about short selling, options, futures and borrowing to trade?

Most scholars and Islamic fiqh councils (official groups of scholars) do not allow the tools below. Here is what each one is, and why:

• Islam does have a halal way to buy now for later delivery, called salam. The buyer pays the full price now for goods delivered later, with a clear amount, weight and date¹⁸. Unlike futures, all the money is paid at the start.
• A small number of scholars allow some of these tools to protect a real business from price changes, not to bet. This is a minority view.

Is it halal to buy and sell currencies?

Changing one currency for another is halal, and people have always done it. Abu al-Minhal was a money changer. He asked two Companions about it. They said Nabi ﷺ told them: if it is hand to hand, there is nothing wrong with it. If not, it is not allowed¹⁹.

Gold, silver and money have a special rule. Nabi ﷺ said: gold for gold, silver for silver, the same amount, hand to hand. If the kinds are different, sell as you wish, as long as it is hand to hand²⁰. Scholars apply this to currencies today:

• Different currencies (for example dollars for pounds): any rate you agree is fine. But the exchange must happen on the spot. Both sides get their money at the same meeting.
• Not allowed: agreeing a rate now and paying later. Nabi ﷺ forbade selling silver for gold on credit²¹.
• Changing money for travel, or sending money home, is normal and halal. Many scholars count a transfer that arrives within a short time as "on the spot".

Online forex trading

Trading currencies on an app, to make a profit when rates change, is different. Scholars today differ:

• Many scholars say most online forex trading is not allowed. It usually uses leverage (a loan from the broker). It charges interest on trades kept open overnight (called swap). And the trades are bets on price moves.
• Some scholars allow it if there is no loan from the broker, no interest (some brokers offer a swap-free or "Islamic" account), and the money changes hands at once in your account. They count that as a real exchange on the spot.

Both views are held by real scholars. Even those who allow it warn that it is high risk and can easily become gambling. Follow a scholar you trust.

Can you save in gold and silver?

Saving in gold or silver is halal. Many families keep some gold for hard times.

• When you buy gold or silver with money, you swap two different kinds. So the rule above applies: pay in full and get the gold, or ownership of it, at the same time²². Most scholars do not allow buying gold in monthly payments or on credit²³. A few scholars today allow it for jewelry.
• Gold apps and gold accounts: many scholars allow them if the gold is real, kept for you, and really yours, so you could take it home if you wanted. If it is only a promise, or a number that follows the gold price with no real gold behind it, they say you do not really own anything.

Do not forget zakat

Allah warns people who store up gold and silver and do not spend them in the way of Allah²⁴. Ibn Umar explained that this was before zakat became a duty. Once zakat came, Allah made zakat something that cleans wealth²⁵. So saving gold is fine if you pay its zakat each year. For gold jewelry, the schools differ. See Zakat on your wealth.

Are pensions halal?

Saving for old age is wise. Sa'd asked to give most of his wealth away in his will. Nabi ﷺ said: it is better to leave your heirs rich than to leave them poor, begging from people²⁶. Not depending on others in old age is part of the same wisdom.

Pensions through your job

• Part of your pay goes into the plan. Often your employer adds money too, called matching. The employer's money is part of your pay, and taking it is halal.
• The real question is where the pot is invested. The default fund is usually normal shares and bonds. Many plans also offer a Shariah or Islamic fund.
• If your plan has a halal fund, choose it. Ask your employer or the pension company how to switch.

What if your plan has no halal fund?

Scholars today differ:

• Some scholars say do not stay in a fund that holds bonds or haram companies. Leave the plan, or move your pot to a company that offers a halal fund, if the law and the plan's rules allow it.
• Other scholars say you may stay in, especially where the law puts you in automatically. That way you do not lose your employer's money and the tax help. Choose the least bad fund, ask your employer to add a halal one, and give away the interest part when you take the money out.
• A pension that pays a fixed income based on your salary and years of work ("defined benefit") is different. You do not choose any investments. Many scholars allow it as a promised part of your pay.

Both views are held by real scholars. Follow a scholar you trust. Pension rules are different in every country, so check your local law and speak to a qualified adviser before you leave or move a plan.

Your own retirement account

A personal retirement or tax-free account is only a wrapper: a tax rule around your money. It is halal if what you keep inside it is halal, like halal shares and funds, sukuk, or Islamic savings.

Do you pay zakat on shares and pensions?

Yes, zakat is due on shares and funds. Shares you buy to sell soon count as goods for trade: pay 2.5 percent of their full value. For shares you keep for many years, pay on the full value, or only on your part of the company's assets that zakat is due on. On pension pots, scholars differ. All the rules are in Zakat on your wealth, and our Zakat calculator adds it all up.

Common questions

Is it haram to invest in the stock market at all?

No. Almost all scholars today allow owning shares in halal companies. A share is part of a real business, and Allah made trade halal²⁷. What matters is which company you choose, and how you trade.

One screening app says a company passes, and another says it fails. Who is right?

Screens use slightly different limits, so both can be honest. Pick one trusted method with known scholars behind it. To be extra careful, keep only companies that pass both.

I had normal shares and an index fund before I knew any of this. What now?

Do not panic and do not lose hope. Move into halal options in a sensible way. Many scholars say give away any interest and haram part of the profit. What you did before you knew is forgiven by Allah's mercy. See Doubtful things, need and mistakes.

My work pension puts me in a normal fund automatically. Do I have to leave it?

First, check if there is a Shariah fund and switch to it. If there is none, scholars differ. Some say leave. Others allow staying in and giving away the haram part. Speak to a scholar you trust and a pension adviser before you leave, because you may lose your employer's money.

Can I use a trading app to buy and sell halal shares many times a day?

If the shares are halal, you really own them, and there is no margin loan or short selling, many scholars say the trading itself is allowed. But most strongly warn against it, because it often becomes gambling and most day traders lose. Investing for many years is the safer way.