How much % to purify from investing profits

Investment Questions and Chats Stocks
#1

I’ve been regularly investing in a global index fund with over 2000+ companies in it’s holdings. I just learnt that some companies in the fund are non-shariah compliant. I found hadith saying that the majority of a thing should be considered as the whole, so is it permissable to keep investing in this fund if most companies are shariah compliant and then donate yearly a % of the gains as purification? Or should I get out of that fund completely?

If I should get out of the fund, how much % of the total profit should I purify? It’s difficult for me to estimate as I don’t know how many of the companies are not shariah-compliant and if they’ve contributed to the funds price to increase.

I would appreciate any advice and help on this matter.

#2

Does anyone know the answer for this? Much appreciated.

#3

Assalamu alaykum, Ibrahim/IFG have posted a guide to determining whether a stock is halal or not, see here: https://www.islamicfinanceguru.com/investment/how-to-screen-for-halal-sharia-compliant-shares/

All of the shariah screening methods I have come across (including IFG) state that the company can have a maximum of 5% haram income to be permissible.

As for purification of the haram amount (up to 5%), this thread on the IFG forum should hopefully clarify things for you

Hope this is helpful

JzkAllahkher
Nawaaz

#4

I have just seen that your question relates to a fund- I don’t know the answer to this, insha Allah @Mufti_Faraz_Adam or @Mufti_Billal may be able to help.

#5

Yeah it’s a bit tricky, since the index fund comprises of thousands of stocks. I really appreciate your answer though! Jazak Allah Kheir.

1 Like
#6

Any advice? @Mufti_Faraz_Adam @Mufti_Billal

#7

Wa alaykum salaam,

The problem with a fund that is not certified as Shariah compliant is they beyond just it’s holdings and asset classes, the investment strategy and trading activities of the fund manager should meet Shariah principles too.

In your scenario, if it was an equity only fund, you would still consider the 5% rule. The total impermissible income can be maximum 5% before the fund becomes non-compliant.

#8

Jazak Allah kheir for your reply.

It is an equity only fund and it’s not shariah compliant. I’ve sold all my shares of the fund and want to know how much I should purify of the profits? Is it 5%?

#9

Is there anyone I can contact to get an answer to this?

#10

Assalamu alaykum

Similar questions to purification of non-shariah compliant stocks have been asked, please see here for the guidance. It seems that all profits need to be purified (i.e. given away):

Can I wait before selling a losing stock that turned non permissible - Questions For IFG/Mufti / Investment Questions - IFG Islamic Finance Forum (islamicfinanceguru.com)

Ibrahim also points to a purification course on the link above. The Muftis may be able to advise further for your case.

JzkAllahkher

#11

@Mufti_Faraz_Adam @Mufti_Billal Salam Alaikum

If I was investing/trading, for example the Nasdaq100 index fund, I know there are some companies in Nasdaq100 which are impermissible. (I’ve checked every company within nasdaq100 and a small number of them are impermissible)

Can I purify my nasdaq100 profits by calculating and donating the haram part of the profits based on the weighting of the impermissible companies within nasdaq100?
For example, American Electric Power is impermissible and has a weighting of 0.44% within the Nasdaq100 so I would donate that 0.44% profit of AEP to charity, in order to cleanse my profits. Is this allowed?

#12

5% is the rule,nasdaq has alot of companies.combine all of them and see if it goes over 5%?