One of the most common misconceptions with Sharia-compliant investment is the belief that only Muslims can invest. This is absolutely not the case – there’s no entrance exam, and no one will need to check your adherence to Islam, or any other faith for that matter.
In fact, both Muslims and non-Muslims choose to invest in Sharia-compliant funds because of the highly ethical nature of these schemes. Under Sharia law it is forbidden (haram) to invest in products that fall foul of Sharia law, including weapons, gambling, and the production or distribution of adult entertainment.
You may have already heard of conventional investment schemes that follow strict environmental, social and governance (ESG) rules. Some banks have even made accounts available to customers that follow strict ESG guidelines with their investment practices.
Well, it’s fair to say that all Sharia investment schemes also comply with these ESG guidelines. In fact, most Sharia funds probably go one step further, since investment in things like alcohol and conventional banking, whose investment practices and policy of charging interest on loans are forbidden under Islamic law, are also not allowed.
While all Sharia schemes are ESG-compliant, not all ESG schemes are Sharia-compliant, so if you really want to be sure your money is not being invested in things that could have a negative social or environmental impact, a Sharia fund could be the right decision for you.
Sharia-compliant schemes are also seen as an appealing option by those who prefer a low-risk, steady return. Thanks to strict Islamic rules on the fairness and transparency of investment and the sharing of risk equally between fund managers and investors, Sharia-compliant schemes tend towards low risk, medium-to-long-term investment over high-risk, short-term fixes. You may not get rich quick with a Sharia-compliant fund, but you’re equally unlikely to get poor just as quick if your short-term fix goes awry.
This means that Sharia-compliant funds are popular with a range of investors who are looking for a reliable, ethical, low-risk return. Ascencia manages a varied portfolio of Sharia-compliant investment options, each with its own objective and risk profile. Consult our advisors for more details.