How to Invest in US Stocks According to Islamic Standards? A Comprehensive Practical Guide

The Five Mistakes That Destroy Your Halal Investments

Before starting your investment journey, avoid these common mistakes that turn your portfolio into non-permissible:

❌ The First Mistake: Relying solely on the “Islamic Label”
Many buy any product labeled “Islamic” without proper verification. The company may be making profits from usurious transactions or forbidden loans beyond permissible limits.

❌ The Second Mistake: Pursuing high returns without verifying the source
A portfolio with 50% annual returns might be half from bank interest. Quick profits often come from mixed sources.

❌ The Third Mistake: Lack of continuous monitoring
A stock that was permissible in January may become non-compliant in April due to new financial decisions or illicit partnerships.

❌ The Fourth Mistake: Assuming all tech companies are clean
A tech company might rely on 40% of its loans from usurious banks or hold large amounts in usurious deposits.

❌ The Fifth Mistake: Trusting individual opinions without consulting specialists
Halal investing requires precise Shariah consultation, not just an opinion from a friend or online follower.

What is the difference between Halal and Shariah-compliant?

Halal: Everything explicitly permitted by Shariah and free from any violations.

Shariah-compliant: Products reviewed by specialized Shariah committees and adhering to specific standards within certain limits. They may not be 100% pure but fall within acceptable boundaries.

The fundamental difference: the first is absolute, the second is relative.

Basic Principles Governing Islamic Investment

1️⃣ Prohibition of Riba (Forbidden Interest)

Riba is the primary enemy of Halal investment. Any transaction involving interest on loans or deposits is forbidden. This principle protects investors from exploitation and ensures profits come from real work, not from accumulating interest.

2️⃣ Avoid Gharar (Excessive Uncertainty)

Gharar refers to ambiguous risks and unclear outcomes. Investing in complex derivatives that the average investor doesn’t understand, or reckless speculation, are forms of Gharar. Halal investment must be transparent and understandable.

3️⃣ Avoid Explicit Prohibitions

No investment in:

• 🚫 Usurious banks and traditional credit cards
• 🚫 Industries involving alcohol, tobacco, and gambling
• 🚫 Weapons and immoral content
• 🚫 Conventional insurance based on Riba

4️⃣ Investments with Social Impact

Halal investing focuses not only on financial returns but also on social impact. Your money should go toward companies that contribute to:

• Genuine community development
• Creating legitimate job opportunities
• Building a sustainable economy

5️⃣ Transparency and Fairness

All contracts and agreements must be clear and fair. Profit and risk sharing should be equitable between parties, without exploitation.

How to Self-Assess the Legality of US Stocks?

Stage One: Examine the company’s core activity

Start with a simple question: Is the company’s main activity permissible?

If the answer is no, exclude it immediately. But that’s not all. You should also check:

• Does the company provide auxiliary services to forbidden industries? (Like: a software company providing systems for casinos)
• Does it have investments in forbidden companies?
• Does it fundamentally rely on income from illicit activities?

Stage Two: Analyze financial ratios

Even if the activity is permissible, the financial structure might be problematic:

Usurious debt to market value ratio

• Allowed limit: does not exceed 30%
• Important note: calculated from market value (Price × Number of shares), not total assets

Deposits and usurious interest

• Should not exceed 30% of market value
• Purpose: prevent companies from holding large amounts in usurious accounts

Unpermitted income ratio

• Allowed limit: does not exceed 5% of total income
• Includes: bank interest, leasing assets to forbidden entities, profits from illicit partnerships

Stage Three: Continuous Monitoring

A stock that is halal today may become non-halal tomorrow.

Why? Because:

• Debts increase after quarterly reports
• The company enters new partnerships
• The unpermitted income ratio rises
• It expands activities through illicit means

Solution: Conduct detailed quarterly follow-ups after each earnings report.

Top 4 Tools to Check the Legitimacy of US Stocks

Zoya ⭐

• Real-time updates on Shariah compliance
• Automated classification: Halal / Mixed / Non-Halal
• Automatic profit purification calculator
• Suitable for beginners

Islamicly ⭐

• Detailed reports on each stock
• Clear guidelines for profit purification
• Monitoring global Shariah indices
• Web and mobile versions

Musaffa ⭐

• Comprehensive company evaluations
• Continuous real-time updates
• Stock comparison tools
• Very user-friendly

AAOIFI ⭐

• Very strict standards
• Compliance with global Shariah standards
• Highly reliable

How to Calculate Profit Purification Yourself

If you earn profits from a stock with a certain unpermitted income ratio, you must purify it:

Step 1: Calculate total received profits

Step 2: Find the company’s unpermitted income ratio (You will find it in the Shariah review reports)

Step 3: Multiply profits × unpermitted income ratio = amount to donate

Practical Example:

• Profits received: $1000
• Unpermitted income ratio: 3%
• Purification amount: 1000 × 3% = $30

Donate $30 to a trusted charity.

Practical Guide: Invest in Halal US Stocks

Step 1: Choose your investment method

Long-term investment (Best for Halal)

• Buy and hold the stock
• Receive dividends
• Benefit from capital growth
• More compliant with Shariah

Short-term trading (Via CFDs)

• Trade price movements without actual ownership
• Flexible and quick
• Suitable for experienced traders
• Requires deep understanding of risks

Step 2: Choose a trusted broker

For direct stock investment:

• Interactive Brokers (IBKR) - Founded 1977, operates in 150+ markets, very high standards of safety and transparency

For CFD trading:

• Mitrade - Founded 2011 in Australia, offers 300+ financial instruments, user-friendly platform

Step 3: Start with 3 steps

1- Open an account: Register your details and verify your identity

2- Deposit funds: Use your bank card or e-wallet

3- Choose your halal stocks: Find a compliant stock, monitor the price, open your trade

Major Halal US Stocks (November 2025)

Important Note: These stocks are considered permissible based on current Shariah standards, but the situation is constantly changing. Verify any updates before purchasing.

Halal US Stocks with Reasonable Valuations (2025)

If you are looking for opportunities with smaller market caps:

Warning: Small stocks may be more volatile and risky. Be cautious about investing all your money in them.

Summary: Legitimacy of US Stocks is Achievable and Practical

Investing in US stocks according to Islamic standards is not an unattainable dream but a feasible reality today.

All you need: ✅ Understanding the basic principles of Islamic Shariah ✅ Using specialized screening tools ✅ Continuous monitoring of your investments ✅ Pure intention and commitment to compliance

Halal investing does not mean sacrificing returns; it means investing wisely and ethically. Many portfolios have achieved excellent returns while fully adhering to Islamic law.

Start today, and take your first steps toward a secure and Shariah-compliant financial future.