Buying shares

[Zahra]

Assalamu Alaikum,

My understanding is that all forms of gambling are disallowed in Islam but buying shares is permissible right? Does anyone have any suggestions wrt companies I could buy shares in?

Walaikum Asalam.

[Mossy]

Hmm gharar (risk taking) is a funny old subject - basically though, you can't buy shares in a company for the purposes of speculation - ie because you think the price of these shares will go up after a oeruid so you can make a profit on these fluctuations (effectively shorting the shares). "Value" investing is effectively what is permitted - kinda in the Warren Buffet mold.

There are some other factors which govern the companies you may invest in such as their field (eg beer companies are nonos) and the amount they are leveraged. I would go into more detail, but, alas, I'm in the middle of packing. Plus I'm not really qualified to wax on about this

Generally, companies on the Dow Jones Islamic Markets index woudl be suitable ones to invest in (given that this index is prefiltered). Find it here:

http://www.djindexes.com/mdsidx/inde...nt=showIslamic

You can have a look at the criteria in the methodology section. As you're in Europe, the Eurozone indexes would be the most suitable.

Have a look through and ask more questions if you like.

[Zahra]

Assalamu Alaikum.

Jazakallah khair for telling me about that link, i'll look into it.

Walaikum Asalam.

[Omar_Farouk]

Assalaamualaykum,

i found this:

http://www.islam.tc/ask-imam/view.php?q=3248

http://www.islam.tc/ask-imam/view.php?q=2418

hope this helps.

Assalaamualaykum.

[suhayl]

Check Mufti Taqi Usmani's book.. forgot what it's called. but coevers almost everything.

[haqq]

Mufti A'zam of Hind, Mufti Kifaayatullah Saahib states in his Fataawa that trading in shares is based on gambling (sattah baazi.). His Fatwa is reproduced hereunder:

"Question: In our age the tramways, railways and other factories sell what they term shares. A company is established for operating tramways, railways or for manufacturing and trading in other products such as steel, timber, etc. The capital is fixed and shares are sold. Salaried employees (officials and directors) are appointed to manage the affairs of the company. They issue periodical financial reports of the shareholders while a portion of the profits is retained (not distributed). This capital is also invested in interest ventures. The interest is also included in the profit for distribution to the shareholders.

The value of these shares rises and falls according to the performance of the company. According to these (market) values, shareholders sell their shares. The method of selling is as follows: the seller instructs an agent to sell his shares. The agent keeps the seller informed of the fluctuating prices. If the seller is satisfied with a price, he instructs the agent to sell. The buyer does not take possession of any tangible assets. What happens is that the name of the seller is expunged and the name of the buyer is now listed as the owner of the shares.

If the buyer wishes to acquire a share of the tangible assets of the company (in view of him being a shareholder), this is not possible. The company's employees will not comply nor will they refund him the price (of his share of the asset). The only option he has is to sell the shares at the market value in the way he has purchased them. Is it permissible to trade in these shares according to the Shariah? If it is permissible, what type of transaction is this. Is Zakaat incumbent on the value of the shares or on the profit (i.e. the dividend)?


ANSWER: The aforementioned transaction is unlawful on the basis of several factors:

(1) This deal does not come within the scope of any transaction of commerce of the Shariah. It is neither a sale nor a partnership nor any other lawful Shar'i transaction.

(2) Riba dealings are haraam.

(3) Buying and selling of these 'shares' are not permissible because the item of sale is unknown. It is quite apparent that the certificate which the buyer receives is not the 'mabee' (the tangible asset of the transaction). The assets being sold are thus either the cash which the company holds or the stock of the company which belongs to all the shareholders. If the mabee is the cash, then is it obvious that inequality (between the price paid and the proportionate cash) is not permissible (since it is riba). Furthermore, the shareholder cannot acquire his proportionate cash from the company. The seller is therefore unable to deliver the mabee to the buyer. At the time of the sale, the seller and the buyer are unaware of the amount of cash which belongs to the seller. If the mabee is a proportionate share of the company's stock, then although the sale of a portion of the partnership asset is permissible, it being unknown renders the transaction unlawful.........This transaction is not permissible. Buying and selling of shares is forbidden."

(Kifaayatul Mufti, Vol.8, page 123)