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What are the different types of investments?

Answered as per Hanafi Fiqh by Darulifta-Deoband.com
Assalamu alaikum, We pray to Almighty to guide us in the right direction and grant us knowledge so that we may work in accordance to His Law. My question is regarding various types of investments, employee share ownership plans, and company pensions. I live in Canada and I work for a bank. I am curious about investments and pensions. It is a major component of life in Canada given the high standard of living and a need to save money for retirement because Government pension is not enough to maintain a normal lifestyle after retirement so there is a need to grow the savings a person has. My concern is regarding different investment options, such as stocks, bonds, mutual funds. I have being doing some research but I need a definite answer from a scholar. From what I know about investments, profit is allowed interest is not. That said any kind of security where money is guaranteed is considered interest and not profit. Therefore bonds and debt securities are not allowed. Stocks are basically ownership interest in a company and they can go up and down in value depending on performance of the company. From my understanding stocks are allowed, if the company is not dealing with pork, alcohol, weapons, pornography and similar things not allowed by Islam. When it comes to Mutual Funds, equity funds primarily invest in stocks with small portion in cash and debt securities for liquidity purposes. If the percentage is small and the money earned from interest is paid to charities, is that type of fund allowed as an investment for a Muslim? For example a resource fund where securities held are from oil companies, energy, gold, minerals and similar, or a dividend fund where holdings primarily come from bank stocks and similar? Second part of question is employee share ownership plan. My bank offers me the ability to participate by matching half of what I invest, and this is invested into the shares of the bank. Is this allowed for me given the fact that it is a conventional bank, and my intention is to take advantage of the bank contributions? Third part of the question is regarding company pension which also comes from a bank where I work. An answer clarifying these issues would be greatly


(Fatwa: 506=494/N)

The share business is allowed with a condition that the company should not be involved in unlawful business and the entire asset is not in cash but it has some properties like land, building etc and started the work and this is known by sure. The same ruling is about mutual fund if the money of the share holders is invested in companies which meet the above conditions. But, if it is known already that the money is invested in banks and in unlawful business then joining such mutual fund and investing in it will not be allowed.

(2) If the profit is given from interest money then participating in this plan is unlawful.

(3) If the pension is given by interest money then also it is unlawful.

Allah (Subhana Wa Ta’ala) knows Best

Darul Ifta,
Darul Uloom Deoband

This answer was collected from the official ifta website of Darul Uloom Deoband in India.

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