Is It Permissible To Buy & Sell Stocks ?

A Muslim can acquire the shares of a joint stock company with the following conditions:

1. The main business of the company must be Halal (permissible) according to Shari'ah. So, a Muslim cannot invest in a company whose main business is Haram, like conventional banks, insurance companies, companies dealing in wines, etc.

2. If the main business is Halal, but it is involved in borrowing money on Interest or placing its funds in an Interest bearing account a Muslim shareholder should raise his voice against this practice in the annual general meeting of the company.

3. When a Muslim shareholder receives a dividend he must ascertain that proportion of the profit of the company which has accrued on its interest-bearing accounts. Then a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakat.

4. If all the assets of a company are in a liquid form and the company has not yet acquired any fixed assets or any stock for trade, then the sale and purchase of shares must be on their par value only.

If any one of these conditions is contravened, the investment in a company is not permissible in the Shari'ah.