Fatwa ID: 22258
Title: Islamic Investment questions
Category: Financial Transactions
Scholar: Dr. Main Khalid Al-Qudah
Date: 01/13/2007


Assalamu Alaykum Dr. Main, Insha`Allah this email finds you in the best of health and Iman.

1) Stocks: I used to think that the only Islamic criteria when it comes to picking stocks was to stay away from places with haram business such as financials, entertainment. But then there are places like Amana (and websites online) that say one needs to check things like the debt/asset ratio to make sure it is below a certain level, company income from interest to make sure it is below a certain level, and other things. In short, conditions that make a tricky process trickier. Which is the correct thing to check for, just the haram business or also the financial data? Especially keeping in mind the presence of companies like Amana that keep track of the halal stocks for you.

2) 401(k): What`s the rule about how to purify a 401(k)? Is it suppose to be done monthly, quarterly, yearly?

3) REITs: Are Real Estate Investment Trusts a halal form of investment? What guidelines, Islamically-speaking, do I need to follow to pick one?

4) I inherited a combination of bank stocks and interest-bearing checking accounts from my father back in Jordan. I have several questions about these: I currently have no access to these from here in the US, I need to travel to Jordan in order to be able to access them from there. So am I required to pay zakat on them? If so, can I at least postpone the zakat till I actually have control of them? As for the shares, I know I can`t keep them since they are bank stocks. But if I sell them, is the whole amount halal for me, or do I need to purify it somehow? If so, how? How do I make sure that whatever sin my father may have carried because of these stocks(I`m not sure whether or not he realized they were haram, according to my mom people told him the bank stocks are more halal than the interest-bearing checking account) is wiped? Do I need to donate a certain portion/all of it?

5) Do you know of any Islamic investment opportunities here in the US other than mutual funds, especially for small investors?

6) Stocks again: I`ve read of several different screens used to determine if a stock is halal or not, how do I figure out which is the most valid? Also, if a stock is deemed valid by the screen that I use, do I still need to purify the profits from it?

7) What is your opinion of the University Bank Islamic Savings and CDs products

http://www.university-bank.com/IslamicBanking/IBDmain.htm ? Is it halal for me to use?

Jazakum Allah Khair for your efforts.




Wa Alaykom Assalam

1-You need to consider the following regarding possessing socks:

A-Any guaranteed profit is not allowed; because this will convert the stock you have into an interest-bearing loan.

B- Possessing – or even transacting -with stocks of companies who conduct prohibited business, like obscene, alcoholic, tobacco, or gambling materials, … etc is prohibited too.

C- (Social responsible fund) companies – like Amana – might help you determining companies who conduct lawful (Halal) business.

2- It is a (zakatable) fund; after subtracting any penalty you might incur in a case of choosing to withdraw the amount before its due date (death, retirement age, or disability), the (net) amount is subject to Zakat, in which you deduct 2.5% as your Zakat.

3- I need more details about REIT to answer your question.

4- To be transferred to Fatwa Committee.

5- NO

6- As I said before, social responsible fund companies might help you in this regard.

7- I did not read their contract yet.