Islamic investing is governed by Shariah rules and parameters. It is also a form of socially responsible and ethical investing. 
Conventional investing, however, is not guided by any Shariah rules and parameters.
 

Business activities involving the following are not permissible under Shariah investing:

• Gharar (uncertainty) – Usually observed within derivative transactions such as options and futures.
• Riba’ (interest) – Most common in conventional banking and insurance sectors through their interest-bearing activities. 
• Maysir (speculation or gambling) – Any financial gains that may be derived from mere chance and speculation such as through short selling and gambling.
• Unethical activities that are against Shariah principles such as promotion of pornography and firearms.
• Companies with primary business activities violate the core tenets of Islam, including the production, trading, transporting and marketing of non-halal goods like alcohol and pork.
   

Two layers of screening are generally applied, namely on the business activity (sector screening) and financial screening:

 

Yes, Shariah investing is for all individuals regardless of their religious beliefs.

Shariah investing should not be dismissed by investors who want to generate the best possible return for their investment. It should be seen as a way of responsible and ethical investing, which allows you to grow your wealth financially without adversely impacting the society and environment. Shariah investing still allows you to build your financial freedom while guided by the Shariah rules and principles. 
 

Shariah investing promotes ethical and responsible investing. It is generally involving less risk due to the strict screening process and the prohibition of speculation. The growth of the Islamic finance industry especially over the last few decades continues to cater the need for more Shariah-compliant investments options.
 

Sukuk is Shariah-compliant bonds or debt securities through which investors participate in the ownership of the issuer’s underlying assets until the Sukuk reaches its maturity date. In other words, Sukuk is the Shariah-compliant equivalent of conventional bonds.

An issuer issues Sukuk, collects proceeds from investors and uses these proceeds to acquire the underlying assets on behalf of the investors. The Sukuk issuer subsequently declares a trust over these proceeds and assets.  The investors will receive their proportionate income from the investment periodically during the tenor of the Sukuk, and receive the capital amount invested at maturity date.
 

Adding Sukuk to your portfolio can be beneficial as it may lower your investment risk and help stabilize investors’ overall portfolio against more volatile asset classes like equities. In addition, Sukuk provides steady periodic income across various market and economic conditions.
 

Yes, Muslims who invest in Shariah-compliant funds are required to contribute 2.5% of their income as zakat if the investment value is equal or greater than the nisab value. Zakat, however, is only applicable for Shariah-compliant investments and income. Income that is derived from conventional funds is to be purified by channeling it to charitable bodies as soon as possible.

The calculation for the zakat amount payable is as follows:

Note: In Shariah law, nisab means the minimum amount that a Muslim must have before being obliged to pay zakat. 
 

In Malaysia, all types of zakat payable on Zakat Al-Mal (Zakat on wealth) and Zakat Fitrah (Zakat on the individual) are eligible for tax rebate on your annual income taxes. A tax refund is a reduction in the actual amount of income tax you have to pay, unlike a tax relief, which simply reduces the amount of your taxable income.

The tax rebate, however, will on be granted to individual tax payers and not corporations.