Islamic investing in the US
Don't see articles such as these on yahoo very often. I have also been putting my 401k into Amaana. Everything aside, the 10 year returns it boasts are quite phenomenal
Link
Friday, July 10, 2009
Subscribe to:
Post Comments (Atom)
10 comments:
IMO - Its just a big scam. Just another way to use religion to funnel money and savings.
The problem is that muslim scholars stopped having intellectual and forward thinking discussions around 1000 AD.
I agree with not investing in companies that do immoral things but bonds that pay you a monthly fee (Fee that is called interest).
Banuri - I know this may anger you but I would rather speak my mind. I still treasure you as my friend.
In addition, to Bajwa's point, I would invest in Amana because its showing good returns not because its an 'Islamic Fund' !
Funny thing is I was reading some blog where the guy said he started investing in it just by looking at the long term return. Later on when he found out what their rules were, he said he was glad he didn't research it too much because he would never have invested in it.
Here is a recent rating of outperforming funds
link
@Cloak: Are you pulling your best SledgeHammer impression? Or do you actually feel that way! :)
So I just read the article. I like the concept of the Islamic fund for investing - makes sense to me. If someone has moral objections to investing in any and all company, why not invest in a fund that meets their needs.
But I have no idea why this guy had issues with a credit card. I've had credit cards for 15 years now, and have never carried over a balance. Being smart means you won't pay interest.
As for the home loans - that's just plain stupid. You may call it whatever. But if you are paying more than the current net value of the home, you are paying interest. You can package it any way you want, but it's the same net effect. In fact, they end up paying more ($1800/yr more) than if they paid straight interest.
Oh cloak my darling, I'm not angered in the least bit... I'm worried about why you think I would be in the first place...
But, leaving that aside, the point to note is that Islamic Finance (and related instruments) really only differ in a couple of ways, i.e. not investing in companies dealing in prohibited substances, and only in transactions that have a "product" on one side...
So, prohibition on interest is a bit of a misnomer... the more hardcore interpret it as no interest at all, but money has a natural rate of growth. Technically, the prohibition should lie on excessive interest in a market economy (which was the catholic reinterpretation back in the 1700's I believe).
Bonds that pay you a monthly fee is (as cloak and sledge note) window-dressing. But really, stocks are legal too since they pay dividends.
Options and futures are really the main bans that Islamic finance carries, which is the primary reason why Islamic funds outperformed regular funds in light of the latest market crash. If you compare returns during boom-bust cycles, regular > islamic during booms and vice versa in busts so it's more steady.
The scam argument is not without some merit, however. I wrote a paper proposal a few years ago (which I didn't get around to finishing) looking at the scam portion in housing using Islamic finance tools. We found (at the time) about 2% increase in overall expenditures due to fee's charged by the Islamic finance folks (I think La-Riba was the one we studied, but am not sure).
I've said this before, but if you don't carry a holistic view, I'd recommend these funds during bust cycles, but switch to regular instruments during boom cycles. The trick is to know when to switch, but so far General Musharaf (the blogger) seems to carry the best insight (at least when it comes to houses anyway).
There are some muslim scholars who have addressed these issues, and there is work being done in creating alternate financial instruments (I know of atleast one paper that created islamic futures, Sadi I think was the guy). They've yet to be put into place because the rulings are a bit slow, but some work has been happening recently.
One final point, leading a more faith based life comes at a price, whether you give to the mosque on Fridays, or Zakat, tithing, whatever. Treat whatever differences you incur when choosing between something holy and something regular as the price you pay for leading a faithful life. Just as you would give money to a beggar thats hungry over a beggar thats wanting to get high or some such, treat this the same way. Just make sure it going to a good cause.
Or not... doesn't really matter to me, but just be sure its not a scam (which requires the usual due diligence). Given the Madoff situation, it seems investing is very much a buyer beware situation and is best treated as such.
Banuri loves you all.
I think its pretty cool. Islamic funds are nothing more than innovative products that address a particular market segment, its good business, whats not to like?
Verily, the pious among us reject riba. Quoting the Quran (surah al-baqarah, verse 275):
"Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say:"Trade is like usury," but Allah hath permitted trade and forbidden usury.Those who after receiving direction from their Lord, desist, shall bepardoned for the past; their case is for Allah (to judge); but those whorepeat (The offence) are companions of the Fire: They will abide therein(for ever)."
jazaak Allah khaaer.
@banuri: Yeah, I think Islamic funds are a great idea. Any fund that tickles anyone's fancy is a pretty good thing.
But I don't agree with repackaging interest, and calling it something else. Especially when you are making a further loss! The bank is not being Islamic - they are looking at a fair return on their ownership of the home. And whatever they are doing, in the end it's interest.
You made a great point about the natural growth of money. And that's what interest is for. Interest rates have typically been around the same (or less) than the expected return from property and investments, so it definitely can't be considered excess.
But the mullahs of the world see any sort of interest as haraam, and have gone through great lengths to convince followers of this fact. Funnily enough, I've met quite a few people who are convinced that interest is totally haram, but have no problem taking out a mortgage because they feel like they have to own a place. Classic cognitive dissonance.
I do agree with you that excessive interest (subjective, as it may be) is probably what was targeted by religions. But that's not how today's religious mafia portray it.
@mk: But braather, the maulaana told the sister in the article that taking out an interest loan for education is ok. So is the maulaana correct, or will she stand in the hell fire with great sinners like me?
Post a Comment