Shariah-compliant stocks are those that adhere to Islamic principles, considering the company’s primary business, investment activities, and financial standing. However, it’s important to note that a stock's Shariah status can change over time.
How and Why Does Shariah Compliance Change?
Sources of Revenue:
If a company’s revenue from impermissible or doubtful activities (e.g., interest-based income 💰, alcohol 🍷 and tobacco 🚬 sales, or mixed income from permissible and impermissible sources) exceeds the allowed threshold (e.g., 5% of total revenue), the stock may no longer be classified as Shariah-compliant.
Debt Levels:
If the company’s debt rises above the permissible ratio relative to its total assets or average market capitalization (e.g., exceeding 30%) 📊, its compliance status may change.
Interest-Bearing Securities and Assets:
If the company’s interest-bearing assets (e.g., bonds 📈 or interest-earning deposits) rise above the permissible ratio relative to its total assets (e.g., exceeding 30%) 📉, the stock may no longer be classified as Shariah-compliant.
How Often is Compliance Reviewed?
Shariah compliance is typically reassessed quarterly based on the company’s published financial results 📅.
Important Note:
InvestSky has partnered with Musaffa, which provides tools to filter and identify Shariah-compliant stocks. However, these tools do not guarantee authenticity or ensure the accuracy of a stock’s compliance. For further assurance, we recommend consulting a Shariah advisor or reaching out to us to relay your questions to Musaffa.