Islamic Shariah Investments Free essay! Download now
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Islamic Shariah Investments
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DescriptionInvestments according to Islamic Shariah Principles
Definition of Investment
In finance, an investment is an asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.
Types of Investments
There are many types of investments. It could be categorized as “Financial Instruments” and “
Liquid investments are investments that could be turned into cash relatively easily and assume various forms, such as savings accounts, Certificates of Deposit, Money Market Accounts, and other interest-bearing accounts offered by banks. Normally, these types of investments are insured and although they offer low rates of return, they are relatively less risky. Interest earned on these accounts is considered 100% taxable income.
Bonds - Guaranteed Investment Certificates (GICs)
These are fixed-income securities, the term commonly used to refer to any securities that are founded on debt. When you purchase a bond, you are lending your money to a company or government. In return they agree to give you interest on your money and eventually pay you back the amount you lent out. The investments in bonds are relatively safe and its returns also guaranteed but generally lower than other securities. Interest earned on GICs is considered 100% taxable income.
A stock normally represents your ownership within the corporation. The advantage of holding a stock is that not only do you own a piece of the company, you also have the liberty to trade these instruments in an open market (and thus realize capital gains) and reap income in the form of dividends, which are declared when the company makes profits. Stocks, as an investment class, are very volatile and may be subject to sharp market fluctuations and uncertainty. Compared to the bonds, stocks provided relatively high potential results as well as high risk.
Mutual funds are a large aggregation of stocks, bonds, and other financial investments, except that they are managed by professional investors. When you buy a mutual fund, you are pooling your money with a number of other investors. The advantage of mutual funds is the possibility of diversifying your financial investment over a large pool of investments.
For those who keep track of the real estate market, buying, selling, and renting property could be a viable financial investment. Not only will you realize capital gains if you invest in the right property, there is also the possibility of earning rental income.
The 'yellow metal' is a preferred investment option, particularly ...
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