Minggu, 31 Januari 2010

Investing for College Education

Investing for College Education

Which is the best time to start Investing for College Education of your Children? Well the Answer is -

NOW…!!!

Yes, The answer is now. According to my theory, the day you have strike this idea in your mind, you should start investing from that day only for your child’s college education. Now, you will ask me that, but I don’t have children because I am not married yet. Well, please don’t give me excuses.

My Answer will be the Same.

If you are not married than it’s fine. But Than also start investing for college education of your children NOW.

Now, you understand how important starting early is? Even if your children are not born, The Best Time to Start Investing for anything in this world is still NOW. This is because the power of compound interest. The compound interest is so powerful over the time that, it multiplies your money in a breath taking manner. But for that, you have to stay invested for the long time horizon say for example more than 10 years.

Even if you are just married today and don’t have any kids than also it is advisable to start investing for your kids. Because the more early you start, the more compound interest will work on your investments and the more capital you will accumulate for your children for their college education.

In USA, the college education fees are getting higher and higher every year and that’s why it is advisable to start investing small amounts of money early but regularly rather than earning a lot when your child grows and near their college education.

So now you have read and fully understand this article. So now it’s the time to start investing for College Education for your Children.

Investing for Children

Investing for Children

Do you have children? Have you ever planned for the financial future of your children such as College Education, Marriage, Career…etc?

Most of the people in United States never think about the financial future of their children. And when they start thinking about their children’s financial future, It’s too late. Yes, This is true. I receive so many queries from USA like, I want to Invest for my child’s future but don’t get enough time from my job or I want to plan the Investments for my child’s future but what’s the hurry? They are just kids and many other excuses.

But well, according to me all of the above are the excuses and nothing else. Ideally you should start Investing for your Children from the first day they born. Yes, Starting Early is that much early in the game of Investment. There are several Child Insurance & Investment schemes available in the US Market. You can chose any investment scheme from the financial market.

However, the thing is that, You have to TAKE ACTION & START INVESTING EARLY. Starting Early is the only key of the Financial success. This is because those who have started early will accumulate more wealth than those who have started late or never ever invested.

Several people I know from USA have their children in High School but they are so much deep in debt that they simply can’t start investing. So your financial life is directly related to the Investment success. If you are a deep in debt than you will never ever invest for your child’s future.

So first of all, chose the sound financial life. Stay away from debt, spend less than you earn and start investing for children as early as possible means now…!!!

Investing for College Students

Investing for College Students

Are you a college going student? Than let me ask you a question. The Question is – Have you Started Investing? I know that many of you will think that, what a crazy question is this? How can a college going student start investing? After all, the college life is the time to enjoy a life and spend money and still there is a long way to go for retirement (probably at 65) than what is the need of Investing for College Students?

Most of the college students think in this way. They think that Investment is a game of old people. Once you get old or near your retirement, you should start investing. But well, this is a Myth. The Truth is that, you should start investing as early as possible in your life means Now.

Warren Buffest has started investing in the stock market when he was just 13. Today he is 80 and he is world’s second richest person after Bill gates. Starting early is very necessary even if you are in your college life. No matter how small the amount of investment is but you should start investing from your college life.

You can do a part time job in your college life and make some extra money or you can save money from your pocket money and start investing in mutual funds, stocks, bonds, gold, domain names, blogs, web properties or any other asset.

There are several assets available in the market. Rather than adopting a hyper consumer life style in the college life, you should try to understand the importance of investing in your early life. Unfortunately, most of the college students spend their time, money and energy behind unproductive things and when they enter into the real life, suddenly all the college life enjoyment disappears.

And they started thinking that, working hard at the job place and living paycheck to paycheck is the life. What they have lost in the college life is TIME & not the money because the lost money can be recovered but the lost time can never be recovered no matter how much money you have…!!!

Investing for Income

Investing for Income

There are basically 2 ways of Investing.

01) Investing for Capital Gains &

02) Investing for Cashflow (Income)

I prefer the second form of investing – Investing for Income. Most of the people in this world think that, Investment is only a game of money. But well, this is not true. Investment is a game of money and time both. You can also create Income generating asset from the investment of your time only.

Say for Example this Blog. This Blog is the Income generating asset created as a result of Investment of my time only. I have invested 6-8 hours a day since last 2 years behind this blog and today this blog provides passive income for me without much effort.

You can also invest your money and acquire the income producing assets such as Dividend Stocks, Mutual Funds, Rental Properties, Businesses…etc..

Why Smart people Invest for Income?

Well, This is because Investing for Income (Cashflow) means you are investing in those assets which provide you a steady cashflow. If you invest for the cashflow than you don’t have to worry about the daily ups and downs of that asset class.

Say for example, if you have invested in Dividend paying stocks than you don’t have to worry about the daily price fluctuations of that stock because even if the price of that stock goes down, you will still make a good income in the form of Dividends.

Another Example is – This Blog. I don’t have to worry about the daily ups and downs of the valuation of this Blog. This is because as long as I receive a cashflow from this web property every month, I don’t need to worry about its valuation.

And that’s why Rich people invest for the Cashflow.

Cashflow Versus Capital Gains Strategy -

Both the Investment strategies have their own pros & cons. Nothing is better than the other. If you invest for Capital Gains than the main advantage is the tax advantage. Unless you sell your assets, you will not have to pay any tax. This is really good.

But at the same time the main disadvantage of investing for capital gains is that, for the most of the time of your life, you won’t be able to enjoy this money because most if the time of your life, it will remain on paper only unless you sell whole of that asset.

While this is not a case of Cashflow Investing. Here you Invest for Income so you can enjoy that money for the whole of your life (However, you will have to pay on your realized Income).

I Personally like Investing for Income (Cashflow). This Blog is my Cashflow Investment and creating this blog my life changing financial decision because that day (March 2008), I chose investing for the Cashflow rather than the Capital Gains…!!!

Investing for Retirement

Investing for Retirement

Many people in their thirties think that What is the hurry of investing? There is till a long way to go for the retirement. But well, this is Myth. The truth is that, ideally you should start investing for retirement from the first day of your active earning life means probably from your twenties. Yes, ideally you should start investing for retirement from the day you get your first job.

Start Investing Early is the key of peaceful retirement. This is because the earlier you start, the compound interest will work more in favour of your investments to grow them large over the time. If someone has invested for 15 years for his retirement and the some other persons has invested for 20 years for his retirement than the second person will have much more retirement corpus than the first person.

The only 5 years of difference in starting investment can make a huge difference in the wealth later on. And that’s why when people ask me that, What is your advise about Retirement Planning? I say them that – Start Early.

Because this is the 90% advise that anyone needs to become financially Independent on retirement. And those who have started investing very early in their life have accumulated so much corpus in their early life that, they managed to retire in their forties and early fifties.

My another concern about Investing for retirement is that, most of the people think that investing for retirement means invest in the 401(k) plan and than wait and watch until your retirement to see weather the money has grown in your 401(k) plan or not? But well, believe me, The 401(k) Plan and the Social Security Plans are not sufficient enough to become financially independent after your retirement.

You will have to invest somewhere else rather than these plans for a financially peaceful retirement say for example in your own Business, Mutual Funds, Dividend Stocks, Rental properties…etc.. Investing only in 401(k) plan and Social Security scheme doesn’t guarantee any kind of financial peace after retirement.

So keep in mind these few key concerns about investing for retirement and plan your retirement accordingly.

Investing for Kids

Investing for Kids

This article is not for the parents who want to invest for their kids. This article is for kids who want to learn the game of investing. “Investing for Kids” means Investment exercises for Kids for the purpose of this article.

Ok so are you a School or High School Going Kid & want to learn how to invest money? Than this article is for you. Let me tell you honestly that when I was a Kid and I used to say my parents that, I want to learn how to invest money, they used to say me that, Investment is not a game of kids because it’s risky. Once you grow mature, you learn what is investing and start investing.

But well, this was a Myth. The only problem of following my parents’ advise is that, you will be very late by then and Investment is a game of money & time both. And the winning formula of successful investing is - “Start Early”. Warren Buffet has started investing in the stock market when he was just 13 years old and today at the age of 80 years he is the second richest person of the world.

Here are the various ways by which Kids can invest money -

01) Stocks & Mutual Funds: Kids and teens under the age of eighteen cannot acquire most investments directly. They can, however, own them through a UGMA account or some other type of trust.

But yes, it is possible to invest in the stock market and mutual funds via UGMA account if you are a kid. Simply subscribe some finance blog and start learning about stock market investing.

02) Domain Names – Yes, Domain Names. I know that your parents will surprise if you tell them that you are investing in Domain Names. But believe me, Domain Names are the real estate of the Internet and they are the most valuable properties on the Internet. The Domain name Loan.com was sold for whooping US $ 3.1 Million in 2001. So you can imagine that how profitable this asset class is.

Simply go to GoDaddy.com and buy a Domain name for you. It costs just US $ 10

03) Invest in Web Properties (Blogs, Websites, Forums) – Flippa.com & SitePoint.com are the Internet marketplaces for web properties. Here you will find a web property for sale starting from as low as $ 100. Web Properties are the Information age Investments which give much higher return than the traditional offline assets such as stocks, bonds, gold and real estate.

04) Invest in Collectible Items – Yes, Collectible items are also the form of Assets such as Stamps, Coins, Coke Crowns, Vintage Cokes, Vintage Toys, Clocks, Knives, Insects & many other collectible items.

Thus, you can start investing in any one or more of the above assets. Most of the people around the world believe that only stocks, bonds, gold, real estate and mutual funds are the assets to invest but it is not true. All of the above assets can be the great investments for Kids & Teens.

Investing for Deflation

Investing for Deflation

As all of you know that, US Economy may slip into the Deflation. However, the Fed has printed almost $ 1.2 Trillion and pushed it into the economy so the chances are very likely that, we will experience the Hyperinflation rather than the Deflation because the newly printed will dilute the purchasing power of the existing money in the circulation which will cause hyperinflation.

Now, what it means by Deflation? Well, it’s exactly the reverse of Inflation (Hyperinflation). Means here the purchasing power of money increases over the time. This means that goods, services & Assets in the economy become cheaper and cheaper day by day. Initially it looks cool but this is not good for economy & businesses in the long run because the businesses will post the low earnings on the wall street and their share prices will go down and thus the erosion of wealth.

Now, What to do as an Investor during the time of Deflation?

Well, it’s very simple. Here are two ways for Investing for Deflation -

01) According to Financial Experts, “It is always advisable to become a lender (Debt/Bond Holder) rather than a Borrower during the time of Deflation.”

It means that during the time of deflation, you should invest in the debt funds, bonds and any other kind of debt instruments. Because during the time of deflation, your money becomes more valuable day by day (Exactly reverse of the Inflation). So it is not advisable to borrow money but to lend money.

02) Cash is the Best Investment during Deflation – Well, This is because during the time of deflation, your money becomes an Asset. Otherwise, money is not an Asset because the inflation erodes its purchasing power over the time. But during the time of deflation, the value of your money increases day by day because the goods and services in the economy become cheaper and cheaper. Thus, Money (Cash) is the best asset during the time of deflation. So Invest in Cash during the time of Deflation.

So follow the above 2 basic principles of Investing for Deflation and you will always win during the time of deflation.

Investing for Dividends

Investing for Dividends

Investing for Dividends is known as Investing for cashflow. Here you invest in the stock market for cashflow rather than the capital gains. Most of the people lose money in the stock market because they invest for the capital gains while smart investors are those who invest for the cashflow.

In fact, there are several people around the world who have worked hard for 10 years day and night and build the portfolio of Dividend paying stocks and today they are enjoying their early retirement while travelling the world.

The main advantage of dividend income is that, it is a tax free income. Because the company has to pay Dividend Distribution Tax (DDT) which is very low in comparison with Income tax. Thus, building your own Dividend paying stocks portfolio is a wise financial decision if you want to retire early.

Now, the only key of building the successful Dividend Portfolio is – Start Early.

Yes, This is the 95% advise that anyone needs. You will find a list of dividend paying stocks on any website on the internet but to make it a winning portfolio on which you can live for the rest of your life, you need to Start Early because than and only the compound interest will work on your portfolio more to make you rich.

If you want to retire early or retire with financial freedom than Investing for Dividend is a sound financial strategy. Rather than investing for only capital gains, you should go for this way. This is because in this strategy, even if the stock prices fluctuates, you will still receive a Dividend Income from your Investment which you don’t receive if you invest only in Growth Stocks only for Capital Gains.

So Invest for the Cashflow (Dividends) Stocks and enjoy the steady passive income.

Investing for Dummies

Investing for Dummies

Investing for Dummies is a great book series in the USA. You can find whole the series of books on Amazon Book store. The Author Eric Tyson covers all the aspects of investing in very simple and easy to understand language for us. If you are totally news to the Investing than I strongly recommend you to buy these books.

 http://ptgmedia.pearsoncmg.com/authors/t/tyson_eric/tyson_eric_c.jpg

About Eric Tyson - (EricTyson.com)

Eric Tyson is a best-selling personal finance book author and has penned five national best sellers. He is also the only author to have four of his books simultaneously on Business Week's business book bestseller list.
His Personal Finance for Dummies, a Wall Street Journal best-seller, won the Benjamin Franklin Award for Best Business Book of the Year. His book, Let's Get Real About Money, is an action oriented guide to developing and practicing the best financial habits and strategies. Eric's syndicated newspaper column is read by millions of readers weekly. He is a former columnist and award-winning journalist for the Sunday San Francisco Chronicle.

Eric's work has been featured and quoted in hundreds of local and national publications and media outlets including Newsweek, The Wall Street Journal, Los Angeles Times, Chicago Tribune, Forbes, Kiplinger's Personal Finance Magazine, Money, Worth, Parenting, USA Today and on the NBC Today Show, ABC, Fox News, CNBC, PBS Nightly Business Report, CNN, and on CBS national radio, NPR's Marketplace Money and Bloomberg Business Radio. He's also been a featured speaker at a White House conference on retirement planning.
Tired of working as a management consultant to Fortune 500 financial service firms which more interested in maximizing short-term profits than in providing sound financial products and services, Eric founded in 1990 the nation's first financial counseling firm which works exclusively on an hourly basis. He started his new company with a simple mission: to provide objective, cost-effective personal financial advice, especially to non-wealthy Americans. Through family and friends, Eric had seen many otherwise intelligent people make horrendous mistakes in managing their money, in part, because the failure of our schools and colleges to teach personal finance.

Bond Investing for Dummies

Index Investing for Dummies

Mutual Funds for Dummies

Personal Finance for Dummies

Thus, all of the above are the great Investing for dummies series of Books. All of them are packed with tons of Personal Finance & Investment Advises. Buying all of these books is worth it.

Investing for Beginners

Investing for Beginners

Are You a Beginner & have you never heard anything about the Investment? Than This Article is for you. After reading this article, you will understand that why and how you should Invest? I will explain you in very simple language in this article that why & how you should invest?

What is Investment & Why You should Invest Your Money?

Well, the first very basic question comes is Why anyone should invest his money? Well, first of all let us understand what is investment and how it works? Well, see. In very simple words,

Investment means making your money work for you rather than you work hard for money.

Yes, Investment is the science and art of making money out of money. Every morning, you wake up and run to your job place, do the job or provide some kind of professional service in the economy (Doctors, Lawyers, Actors, Artists, Freelance writers). This is because you have the potential to make money in the economy and that’s why you do this.

But do you know that your money has the same potential as you to make more money? When you will realize and understand this fact, you are on the path of Financial Freedom & Becoming rich. Believe me, Your money has the same potential as you to go in the economy, work harder than you and earn more money. But to make money from money, you will have to make it work harder for you. And this process of making money work harder for you to make more money is known as Investment.

Rich people know this fact since their very early life and that’s why they have started focusing on making their money work for them since their early twenties or even before that. Warren Buffet had started investing when he was just 13.

So Now, you understand that, why you should Invest? Well, because you want to become rich, financially free and enjoy your life. This is because you don’t want to work for the rest of your life living paychecks to paychecks and dying with a huge debt and unpaid bills leaving behind you.

How to Invest Money? – Where to Invest Money? -

Now, the second obvious question comes is, How to invest money? Where rich people invest their money to get more richer? Well, Rich people Invest their money in Assets. Now, let us understand what is Asset?

Well, Asset Is something which puts money into your pocket by providing Capital Gains or Cashflow

Anything in this world which can fulfill the above criterias is the Asset. This Blog is an Asset because every month it generates money for me and put that cashflow in my pocket. So this Blog is my Asset. Here are the Examples of Assets.

Stocks, Bonds, Gold, Silver, Precious Metals, Oil, Real Estate, Mutual Funds, Art, Vintage Cars, Web Properties, Websites, Blogs, Domain names, Intellectual Properties, Movies, Music, Collectible Items, Sports Teams, Vintage Guitars are the few examples of Asset. However, anything can be your Asset and you can invest in it.

So buying any one or more assets from the above list out of your money is known as the Investment. Warren Buffet is the Stock Investor, Jim Rogers is the Commodity Investor, George Bush is the Crude Oil Trader & the Investor…etc…

Investment is a game of Money & Time Both -

Most of the people in this world have a false belief that, Investment is a game of Money. Well, this is the partial truth. The full truth is that, Investment is the game of money & Time both. You can only invest your time and still make money.

Say for Example, Take the Example of this Blog. This Blog is my Investment of Time only. I have not invested a single penny behind this blog to start it. I have only invested 6-8 hours a day behind this blog and today This Blog is my most valuable Asset.

Bill Gates has invested over 10,000 hours of his time to develop the world best OS (Operating System) Windows and after that Investors & Venture Capitalists have invested their money in Microsoft Corporation and Bill Gates has become the richest man in the world.

Thus, you can invest both your money and time and make a fortune. So What are you waiting for? Start Investing Now. You are not the Beginner now. Now you know that, what is investment, why you should invest and where to invest your money?…

Investing in Silver

Investing in Silver

Silver is a precious metal and has been regarded as a form of money just like gold and store of value. However, since the end of the silver standard, silver has lost its role as legal tender in the United States.

In 1971, the President Nixon has removed the gold standard and the silver standard and after that the US Dollar is just the tender. Modern Money is backed by the full faith of the governments around the world but does not have any intrinsic value in it.

China is the largest consumer of Silver since several centuries. However, recently China has started motivating their citizens to invest in silver. This may be because of the money printing activity of the US Government. Recently, the federal reserve has increased it’s monetary base from $ 800 Billion to $ 2 Trillion. In other words, the US Government has printed almost $ 1.2 Trillion out of thin air only.

And there is a potential danger that this will dilute the purchasing power of the existing money in the circulation. China is the largest holder of UD Treasury Securities. This means that China will be affected the most in terms of purchasing power because of the money printing activities of the US Government.

And that’s why the Chinese Government has started motivating their citizens to start investing in Silver.

US $ 5 Silver Certificate

American Silver Eagle Bullion Coin

How to Invest in Silver? -

There are various forms in which you can store the silver. Here are the various methods of  investing in Silver.

- Bars
- Coins
- Rounds
- Exchange Traded Funds
- Certificates
- Accounts
- Derivatives
- Mining Companies
- Spread Betting

You can invest in silver from the any of the above ways. According to many global investors, right now the silver price is undervalued and it will go high further and thus it’s the best time to buy silver at low price. Because you will never find silver at such low price.

Investing in the Stock Market

Investing in the Stock Market

It really surprises me when people say that they are afraid of investing in the stock market. They argue that, I prefer to invest safe and that’s why I invest in the bank fixed deposits, bonds and debt instruments. Because I want to play it safe.

But well, let me tell you that, the Bank Savings Accounts, CDs & Fixed Deposits are also not the 100% safe because here also the risk of inflation eroding the purchasing power of your money over the time. The main problem is that, people can’t see the inflation and that’s why they assume that it doesn’t exists. But the thing that you can’t see doesn’t means that it doesn’t exists.

Inflation & Tax both are the silent killers of your money. Both of them will slowly erode the purchasing power of your money but Stock market Investments don’t attract any long term capital gains tax if hold for more than 1 year period as well as they beat the inflation very well in the long run.

In the United States, the inflation is 2-3% per Annum and the Stock market returns in the past 20 years is 11% annually on and average & that is 8-9% actual annual return from the stock market in the long run. Now, this is amazing. No other Asset class in the USA has given this much return in the long run after beating the inflation.

And that’s why I advise people to invest in the stock market. Now, by investing in the stock market doesn’t mean trading in the stock. Investment means pure long term investments based on the fundamentals of the companies.

Mutual Funds Versus Direct Stock Investing -

In the United States, most of the people don’t have any time to manage their own investments and that’s why the concept of mutual funds came into exists. Mutual Funds pool the money from several small investors like you and me and collect the large amount of capital. It has it’s own fund manager and the team of research analysts.

The Fund manager invest your money on behalf of you and make a portfolio for you. However, the Index mutual funds have given much more return than the actively managed funds in the long run because the index mutual funds are associated with very low fund management charges.

Vanguard Index Mutual funds are the best long term investment vehicles in the USA.

The earlier you start investing in the stock market, the more compound interest will work in your favour and make you rich over the time. And that’s why i advise people to start investing in the stock market as early as possible means NOW.

Remember,

The Best Time of Investing in the Stock Market was 20 years Before &
The Second Best Time is NOW…So Start investing in the Stock Market NOW…!!!

Investing in Real Estate

Investing in Real Estate

Real Estate is the best asset class if you want to generate money from both the Cashflow & Capital Gains. I am talking about Rental Properties. Since past 2 decades, the Real Estate in USA & parts from all around the world has been appreciated a lot. However, since 2007, because of the Sub Prime Mortgage Crisis in USA, the Housing Bubble has burst and the real estate prices all around the USA has come down drastically.

Now, many people are afraid of investing in the real estate. This is because previously people used to think the prices of the real estate goes only in one direction and that is up. But it’s not the true. Today those investors, who had invested in the real estate for the Cashflow are much better position than those who had invested for merely capital gains.

And That’s why I advise people to invest for the Cashflow rather than Capital Gains. You should always calculate the ROI (Return on Investment) before doing the real estate investment. And if the Cashflow is negative you should not buy that real estate. You should only invest in the real estate if it gives you the positive cashflow.

If you want to become a real estate Investor than I can suggest you a great course.

Real Estate Cashflow – Apartment Building Cashflow

You will find lots of real estate investment strategies in the above course. You will become master in real estate investing after you learn this course.

REMFs & REITs -

Now, not the everyone can afford to invest $ 100,000 to buy their own rental property. And here the concept of Real Estate Mutual Funds (REMFs) & REITs (Real Estate Investment Trusts) comes. They are just like the regular equity mutual funds means they pool the money from large number of small investors like you and me and after that they invest in various real estate, infrastructure and rental properties projects. Their main objective is to generate rental income and distribute among the Investors.

Thus, now if you have just $ 1000 in your pocket than also you can invest in Real Estate via REMFs & REITs.

Right now in USA, the prime location properties are in the process of foreclosures and this is the opportunity to invest in the real estate at bargain price for me. So take the advantage of foreclosures around you and spot the great property for you.

Investing in Bonds

Investing in Bonds

Bonds constitute the major part of anyone’s portfolio. The World’s Bond Market is worth of Trillions of Dollars which is much more than the Equity market of the world. As of 2009, the size of the worldwide bond market (total debt outstanding) is an estimated $82.2 trillion, of which the size of the outstanding U.S. bond market debt was $31.2 trillion according to BIS.

So you can imagine that How big the Bond Market is?

What Are Bonds & How they Work?

Let us understand the Bonds in simple language. Well, whenever a Corporation (Private Entity) or the Government wants to borrow money to expand its various projects or fuel its growth, it issues the Bonds also known as Debt Paper. Now, the Individuals, Investors, Other Corporations & The Governments from all around the world buy these bonds and finance the bond issuer.

Say for Example if you buy $ 100 Bond of J P Morgan than it means that you are lending $ 100 to J P Morgan. Suppose if you buy $ 10,000 worth of US Treasury Bonds than it means that the US Government is borrowing $ 10,000 from you.

Bond Ratings -

Corporate Bonds are rated from AAA to CCC Grades according to its credit worthiness. High Quality Bonds are graded as AAA while poorest quality bonds are traded as CCC. However, AAA Rated bonds give you the lowest yield while the CCC rated bonds will give you the highest yield.

Theoretically, the world has assumed that the US Treasury Bonds can never ever default. Because the Government of USA can never default in it’s payments and that’s why the US Treasury Bonds are the safest bonds in the world and that’s why they are the lowest yield bonds in the world.

Bond Mutual Funds -

There are so many Bonds available in the market that, choosing the best bonds itself is a job.  And that’s why the concept of mutual funds came into exists. Here the fund manager of the mutual fund invest in bonds on behalf of you.

Bond Allocation in Portfolio -

Any Portfolio should have 2 Basic Components – Equity & Debt (Bonds). Now, Bond Allocation in any portfolio should be based on the age of the investor. If you are near your retirement than you should allocate more money in Bonds and less in the Equity and if your age is young and the retirement is away, you should invest more in equity and less in bonds.

So Start Investing in Bonds because any portfolio is not the portfolio without Equity & Debt Components.

Investing in Gold

Investing in Gold

Let us today discuss something about the gold investment. Gold is the precious asset class since the history of mankind and the gold was the real money before 1971 worldwide. Yes, the US Dollar and all the major currencies of the world were backed by the gold before 1971.

But after 1971, the President Nixon of USA has removed the gold standard and the US Dollar has become a free float currency and after the gold price has been rise from just $ 15 an ounce to $ 1000 an ounce today in 2010.

This is because the more money the governments and the central banks from all around the world will print and push in the economy, the purchasing power of the existing money (& the newly printed money) will be diluted which drives the commodity prices (Gold, Silver, Oil) higher to the sky.

Since past 5 years, gold has appreciated in 2 digits. Gold has given 2 digits return in the past. India is the largest consumer of gold around the world.

Gold in Portfolio -

Previously the preferred Asset class for any portfolio was Equity & Debt. But in the global financial crises, the paper assets are becoming worthless and gold has taken place in the portfolios of many smart investors. This is because the gold is hedge against the inflation. The gold can beat the inflation very well and give excellent returns in the long run.

However, any portfolio’s Gold allocation should not be more than 10% of its Total Net Worth. Remember, the gold is not for the Capital Gains but it is only to beat the inflation very will. In the long run, Equity has given highest return than any other Asset class in the world.

How to Invest in Gold? -

The obvious question is that, How to Invest in Gold? How many ways you can invest in Gold? Well, broadly there are 2 basic forms of investing in Gold.

01) Physical Gold (Gold Jewellery, Bars & Coins)
02) Demat Gold. (Gold ETFs or Paper Gold)

You can invest in Gold in the various above forms.

Gold Mutual Funds Versus Gold ETFs -

Gold Mutual Funds & Gold Exchange Traded Funds (ETFs) are both the different things. Gold Mutual Funds mainly invest in the Stocks of Gold mining Companies from all around the world while the GOLD ETFs actually invest in physical gold on behalf of you.

Physical Gold Versus Demat Gold -

There are several advantages of investing in the Demat Gold (Gold ETFs). Such as No Wealth tax on Paper Gold, Nothing to worry about Security of the Gold, you can sell it on the stock exchanges any time and many more.

Thus, Invest in Gold. Put the Gold in your Portfolio. Give the Gold a Place in your Portfolio to stabilize it against the wild fluctuations…!!!

Sabtu, 30 Januari 2010

Islamic Investment in India

Islamic Investment in India

India is world’s Second largest population of Muslims – 150 Million after Indonesia. Now, this means that there is a great market in India. However, Islamic religion don’t permit to invest in all the stock market investments & financial products.

Still, many Muslims have a false belief that, they can not invest their money in the stock market or in mutual funds. But this is a Myth. The reality is different. There are Shariah Compliant Investments & Financial Products which are widely available and distributed in the world of financial markets. These are the Stocks & Mutual Funds which only do Business and investments in the companies which strictly fulfill the Shariah Guidelines.

Dow Jones has Islamic index, FTSE of Britain has not only Islamic Index but also a full fledge Islamic bank, but unfortunately there is not a single Islamic Product or an Islamic benchmark in Indian investment environment.


Even more bizarre India is not covered and not included for any of their research work by any Islamic institution or bank .although India is the big market for Islamic investments,and according to me no research work of any research institution could be complete without including India. Although India has a good Islamic structure which provides opportunity of riba free investment and finance which gives us lots of benefit.

Here are the Few facts about Shariah Compliant Stocks in India -

01) While Shariah compliant investment avenues are now becoming available in most countries, India has not seen large-scale development.To gauge the scope of Islamic investment opportunities in the Indian stock market, it is imperative to examine stocks that conform to Islamic Shariah principles "Out of 6,000 BSE listed companies, approximately4,200 are Shariah compliant.”

02) The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE.This figure is higher even when compared with a number of
predominantly Islamic countries such as Malaysia, Pakistan and Bahrain.

03) The growth in the market capitalization of these stocks was more impressive than that of
the non-Shariah compliant stocks.


04) The software, drugs and pharmaceuticals and automobile ancillaries sector were the
largest sectors among the Shariah compliant stocks. They constitute about 36% of
the total Shariah compliant stocks on NSE.

05) Further on examining the BSE 500 the market capitalization of the 321 Shariah compliant companies hovered between 48% and 50% of the total BSE 500 market capitalization.

Facts about Shariah Compliant Mutual Funds in India -

Another opportunity is mutual fund which is based on 100% equity. These funds are
invested in different sectors like IT, automobile telecommunication, cement and a few present in interest based financial institutes, almost 10 to 15 %. So investor has to purify that amount from the profits. And also there are many sectorial funds which invests only in a particular sector like automobile,Oil & Gas, etc

The Investor should not invest in any kind of Debt Mutual funds because according to Shariah Guidelines, you can not earn money through Interest. However, the Sector funds mainly operate in Energy, Pharma, IT, Software & Automobile Sectors are the best Investments for you.

Related Articles:

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- Shariah Compliant Stocks in India

- Shariah Compliant Mutual Funds

- Shariah Compliant Stocks

- Shariah Compliant Investments

- Shariah Compliant Mutual Funds in India

- Islamic Banking

- Shariah Compliant Companies in India (Quick Guide: How to Identify Shariah Compliant Companies in India)

Shariah Compliant Companies in India

Quick Guide: Shariah Compliant Companies in India

Quick Guide of How to Find out Shariah Compliant Companies?

Are You Muslim? And Do you want to invest in the Indian Stock Market according to the Shariah Compliant Way? Than Here is a Good news for you. In this article, I will tell you that how to identify the Shariah Compliant Companies in India? But before that, Read the fact about Indian Stock Market Here.

While Shariah compliant investment avenues are now becoming available in most
countries, India has not seen large-scale development.To gauge the scope of Islamic
investment opportunities in the Indian stock market, it is imperative to examine
stocks that conform to Islamic Shariah principles

"Out of 6,000 BSE listed companies, approximately4,200 are Shariah compliant. The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE.”

This figure is higher even when compared with a number of predominantly Islamic countries such as Malaysia, Pakistan and Bahrain. In fact, the growth in the market capitalization of these stocks was more impressive than that of the non-Shariah compliant stocks.


The software, drugs and pharmaceuticals and automobile ancillaries sector were the
largest sectors among the Shariah compliant stocks. They constitute about 36% of
the total Shariah compliant stocks on NSE. Further on examining the BSE 500 the
market capitalization of the 321 Shariah compliant companies hovered between 48%
and 50% of the total BSE 500 market capitalization.

Quick Guide: How to Identify Shariah Compliant Companies?

The following are the Shariah Investment Guidelines -

Shariah Prohibited Companies (The Investment in Companies in the Following Businesses is strictly prohibited according to Shariah Laws.)

- liquor
- pork
- hotel
- casino
- gambling
- cinema
- music
- interest bearing financial institutions
- conventional insurance companies

Following Industries’ Stocks are Permitted - (The Investment in the companies of following sectors is permitted by Shariah Guidelines. However, you will have to check the Debt of these Companies.)

- IT
- Automobile
- Oil & Gas
- Software
- Tele Communication
- Cement
- Pharmaceuticals

From those of Permitted Sectors, The Companies should fulfill the following 3 Criterias.

01) The total interest bearing debt of the company at any point in time should remain  below one third of its average market capitalization during the last twelve months.
02) Its aggregate of account receivables should remain below 45% of total assets.
03) If company has any interest bearing income it should not be more than 10% in
any condition.

So What are you waiting for? Find out the Shariah Complaint Companies in India from the above Guidelines.

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Shariah Compliant Finance

Shariah Compliant Finance

Many of you may have never heard about the Shariah Compliant Finance. Well, It means that Banking, Business & Investments which strictly follow the Guidelines & Principles of Shariah Investments.

Say for Example, according to the Islamic Religion, you can not earn money through interest. Because it is strictly prohibited in Islam. You can also not invest in the stocks of the companies which have a business in Hotels, Cinema, Movies, Gambling, Casinos, Insurance Business and many other Businesses which are not permitted by the Islam.

However, you can invest in the stocks & mutual funds of Pharma, Software, IT, Oil & Gas, Automobiles..etc.. companies because these sectors don’t violate the Shariah Principles. There are lots of things mentioned in the Shariah Laws. Here are the Information rich Articles Compendium about Shariah Compliant Finance & Investments. Hope you will like it.

- Shariah Funds

- Shariah Compliant Stocks in India

- Shariah Compliant Mutual Funds

- Shariah Compliant Stocks

- Shariah Compliant Investments

- Shariah Compliant Mutual Funds in India

- Islamic Banking

All of the above are very information rich articles and you will find every information regarding Shariah Compliant Investments in the above 7 Articles Compendium.

Many of my Muslim friends ask me that, I want to invest in the stock market but my religion doesn’t permit me. Well, This is Myth. You can invest in Shariah Compliant Mutual Funds & Stocks any time. It is not against the law.

Just go to the above 7 articles and you will find lots of things about Islamic Shariah Compliant Investments.

So now, Don’t wait but start investing in the Stock market with Shariah Compliant Financial Products.

Islamic Banking

Islamic Banking

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics.

There is two ways of getting profit (1) which Islam permits (2) which Islam prohibits. Islam has forbidden earning from interests. And has counted as big sin and among the big sins there is no which forbidden in this manner; that notice a war from Allah and his messenger. Can human being defeat Allah and his messenger?

There are strict guidelines in Islam known as “Shariah Islamic Guidelines”. And according to these Guidelines, Investment in some kind of Investments is strictly prohibited.

The following are the Shariah Investment Guidelines -

Shariah Prohibited Companies

- liquor
- pork
- hotel
- casino
- gambling
- cinema
- music
- interest bearing financial institutions
- conventional insurance companies

Following Industries’ Stocks are Permitted -

- IT
- Automobile
- Oil & Gas
- Software
- Tele Communication
- Cement
- Pharmaceuticals

The Most of the Islamic Community still believe that, Investment is prohibited. But this is Myth. The Truth is that, Investment is prohibited in some kind of Companies only (As per above). Read here the detailed Guidelines of Investment.

(a)The company’s activities should not include liquor, pork, hotel, casino, gambling, cinema, music, interest bearing financial institutions, conventional insurance companies, etc.

(b) The total interest bearing debt of the company at any point in time should remain  below one third of its average market capitalization during the last twelve months.

(c) Its aggregate of account receivables should remain below 45% of total assets.

(d) If company has any interest bearing income it should not be more than 10% in any condition.

I have posted several articles about Islamic investment and Shariah Compliance Investment Opportunities on this Blog. You can find a list of these articles at the end of this article as well as in the “Islamic Investment” Category of the Right Side Column bar of this Blog.

Shariah compliant finance is an important part of life for the faithful. Currently, Shariah-compliant financial products are available to both Muslims and non-Muslims around the globe. Hence, all consumers should have the opportunity to take up these products without facing undue regulatory barriers. Consequently, regulatory framework, including taxation, of Shariah compliant products should apply equally regardless of the faith of provider or consumer.

Any Investments that fulfill the above guidelines are the Shariah Compliance Investments and you can Invest in them.

 

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- Shariah Funds

- Shariah Compliant Stocks in India

- Shariah Compliant Mutual Funds

- Shariah Compliant Stocks

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Shariah Compliance Mutual Funds in India

Shariah Compliance Mutual Funds in India

Many of my Muslim friends ask me that, Which are the Shariah Compliance Mutual Funds in India? Well, Shariah Compliance mutual funds are those which fulfills the Shariah Guidelines of Investment. Here are my 5 great articles on the various guidelines about Shariah Compliance mutual funds & Stocks.

- Shariah Funds

- Shariah Compliant Stocks in India

- Shariah Compliant Mutual Funds

- Shariah Compliant Stocks

- Shariah Compliant Investments

Well, the Conclusion is that, You can not invest in 2 kind of mutual funds according to this guidelines.

01) Debt Mutual Funds – Because making earning from Interest Income is strictly prohibited in Islam.

02) Mutual Funds that Invest in Stocks of the following Companies.

- liquor
- pork
- hotel
- casino
- gambling
- cinema
- music
- interest bearing financial institutions
- conventional insurance companies

Following Industries’ Stocks are Permitted -

- IT
- Automobile
- Oil & Gas
- Software
- Tele Communication
- Cement
- Pharmaceuticals

Remember: Out of 6000 BSE Listed Companies, 4,200 Listed Companies are Shariah Compliant.

Thus, You can invest in Sector Mutual Funds of any one of the above permitted sectors. You can not invest in Diversified mutual funds right now in India because they Include the stocks of Liquor, Pork, Hotels, Cinema, Interest Bearing Financial Instruments, Insurance Companies and other prohibited investments.

According to me, for the Indian Islamic Investors, Sector Mutual Funds are the best Investment Vehicles because they fulfill the Shariah Compliance.

You can learn more about Shariah Compliance Investments in the above articles.

Shariah Compliant Investments

Shariah Compliant Investments

(Research Paper Presented by Mufti Taqi Usmani)

 
The term ‘Islamic Investment ’ in this article means a joint pool wherein the investors contribute their surplus money for the purpose of its investment to earn halal profits in strict conformity with the precepts of Islamic Shari’ah. The subscribers of the Fund may receive a document certifying their subscription and entitling them to the pro-rata profits actually accrued to the Fund. These documents may be called ‘certificates’ ‘units’ ‘shares’ or may be given any other name, but their validity in terms of Shari’ah, will always be subject to two basic conditions:

Firstly, instead of a fixed return tied up with their face value, they must carry a pro-rata profit actually earned by the Fund. Therefore, neither the principal nor a rate of profit (tied up with the principal) can be guaranteed. The subscribers must enter into the fund with a clear understanding that the return on their subscription is tied up with the actual profit earned or loss suffered by the Fund. If the Fund earns huge profits, the return on their subscription will increase to that proportion; however, in the case the Fund suffers loss, they will have to share it also, unless the loss is caused by the negligence or mis-management, in which case the management, and not the Fund, will be liable to compensate it.

Secondly, the amounts so pooled together must be invested in a business acceptable to Shari’ah. It means that not only the channels of investment, but also the terms agreed with them must conform to the Islamic principles.

Keeping these basic requisites in view, the Islamic Investment Funds may accommodate a variety of modes of investment, which are discussed briefly in the following paragraphs.

Also Read:

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Equity Fund
In an equity fund the amounts are invested in the shares of joint stock companies. The profits are mainly achieved through the capital gains by purchasing the shares and selling them when their prices are increased. Profits are also achieved by the dividends distributed by the relevant companies.
It is obvious that if the main business of a company is not lawful in terms of Shari’ah, it is not allowed for an Islamic Fund to purchase, hold or sell its shares, because it will entail the direct involvement of the share holder in that prohibited business.
Similarly the contemporary Shari’ah experts are almost unanimous on the point that if all the transactions of a company are in full conformity with Shari’ah, which includes that the company neither borrows money on interest nor keeps its surplus in an interest bearing account, its shares can be purchased, held and sold without any hindrance from the Shari’ah side. But evidently, such companies are very rare in the contemporary stock markets. Almost all the companies quoted in the present stock market are in some way involved in an activity, which violates the injunctions of Shari’ah. Even if the main business of a company is halal, its borrowings are based on interest. On the other hand, they keep their surplus money in an interest bearing account or purchase interest-bearing bonds or securities.

The case of such companies has been a matter of debate between the Shari’ah experts in the present century. A group of the Shari’ah experts is of the view that it is not allowed for a Muslim to deal in the shares of such a company, even if its main business is halal. Their basic argument is that every share-holder of a company is a sharik (partner) of the company, and every sharik, according to the Islamic jurisprudence, is an agent for the other partners in the matters of the joint business. Therefore, the mere purchase of a share of a company embodies an authorization from the shareholder to the company to carry on its business in whatever manner the management deems fit. If it is known to the share-holder that the company is involved in an un-Islamic transaction, still, he holds the shares of that company, it means that he has authorized the management to proceed with that un-Islamic transaction, In this case, he will not only be responsible for giving his consent to an un-Islamic transaction, but that transaction will also be rightfully attributed to himself, because the management of the company is working under his tacit authorization.

Moreover, when a company is financed on the basis of interest, its funds employed in the business are impure. Similarly, when the company receives interest on its deposits an impure element is necessarily included in its income which will be distributed to the shareholders through dividends.

However, a large number of the present day scholars do not endorse this view. They argue that a joint stock company is basically different from a simple partnership. In partnership, all policy decisions are taken by the consensus of all the partners, and each one of them has a veto power with regard to the policy of the business. Therefore, all the actions of a partnership are rightfully attributed to each partner. Conversely, the policy decisions in a joint stock company are taken by the majority. Being composed of a large number of share-holders, a company cannot give a veto power to each shareholder. The opinions of individual shareholders can be overruled by a majority decision. Therefore, each and every action taken by the company cannot be attributed to every share-holder in his individual capacity. If a shareholder raises an objection against a particular transaction in an Annual General Meeting, but his objection is overruled by the majority, it will not be fair to conclude t hat he has given his consent to that transaction in his individual capacity, especially when he intends to withdraw from the income relatable to that transaction.

Therefore, if a company is engaged in a halal business, however, it keeps its surplus money in an interest-bearing account, where from a small incidental income of interest is received, it does not render all the business of the company unlawful. Now, if a person acquires the shares of such a company with clear intention that he will oppose this incidental transaction also, and will not use that proportion of the dividend for his own benefit, how can it be said that he has approved the transaction of interest and how can that transaction be attributed to him?
The other aspect of the dealings of such a company is that it sometimes borrows money from financial institutions. These borrowings are mostly based on interest. Here again the same principle is relevant. If a shareholder is not personally agreeable to such borrowings, but has been overruled by the majority, these borrowing transactions cannot be attributed to him.

Moreover, according to the principles of Islamic jurisprudence, borrowing on interest is a grave sinful act for which the borrower is responsible in the Hereafter; however, this sinful act does not render the whole business of the borrower as haram or impermissible. The borrowed amount being recognised as owned by the borrower, anything purchased in exchange of that money is not unlawful. Therefore, the responsibility of committing a sinful act of borrowing on interest rests with the person who wilfully indulged in a transaction of interest, but this fact does not render the whole business of a company as unlawful.

Conditions for investment in Shares
In the light of the foregoing discussion, dealing in equity shares can be acceptable in Shari’ah subject to the following conditions:
1. The main business of the company is not violative of Shari’ah. Therefore, it is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, or the companies involved in some other business not approved by the Shai’ah, such as the companies manufacturing, selling or offering liquors, pork haram meat, or involved in gambling, night club activities, pornography etc.
2. If the main business of the companies is halal, like automobiles, textiles etc, but they deposit their surplus amounts in an interest-bearing account or borrow money on interest, the share-holder must express his disapproval against such dealings, preferably by raising his voice against such activities in the annual general meeting of the company.
3. If some income from interest-bearing accounts is included in the income of the company, the proportion of such income in the dividend paid to the shareholder must be given to charity, and must not be retained by him. For example, if 5% of the whole income of a company has come out of interest-bearing deposits, 5% of the dividend must be given to charity.
4. The shares of a company are negotiable only if the company owns some illiquid assets. If all the assets of a company are in liquid form, i.e. in the form of money, they cannot be purchased or sold except on par value, because in this case the share represents money only and the money cannot be traded in except at par.

Shariah Compliant Stocks

Shariah Compliant Stocks Guidelines

The complexity of the share market and the involved Islamic issues prompted to take the concerning matters in the Ninth Seminar of the Islamic Fiqh Academic (IFA), which provided the following guidelines in this regard.


1.1 Equity share in a company is a proof of limited ownership of the shareholder in the company and not a mere indication that he has invested that much amount in it.
1.2 The buying of shares of the companies in their initial stages, which are in the process of collecting their capital, is not buying; rather it is participating or having a share in the company, from the Shariah point of view.
1.3 Generally, the other properties of the company have more value than it''s capital. That''s precisely why it is sound to purchase the shares of a company. Nevertheless, if it is known that the amount to be paid is either less than or equal to the face value of shares, then under these circumstances it would not be correct to buy these shares at a price less than or more than it''s fixed amount.
1.4 The buying and selling of shares of the companies, which indulge in impermissible businesses, like that of liquor, pork or interest-bearing loans are strictly invalid and impermissible.
1.5 It has been observed that the establishment of companies, which would conduct business purely on Islamic lines, is feasible in India. The Seminar urges the Muslim traders and prominent economists to feel their religious responsibilities and strive to set up such business houses, which would work solely on Islamic lines. Nevertheless, since such companies have not been established in India that work strictly on Islamic lines as yet or even if present they are still negligibly small in number, therefore, those Muslims who have capital and are unable to invest in valid and permissible business ventures owing to certain circumstances, can purchase the shares of the companies carrying permissible businesses (for example, manufacturing of engineering instruments or items of general use) even if they have to indulge in interest transactions owing to legal liabilities and constraints.
1.6 Muslims holding shares in such companies, whose prime business is permissible, although they are, incidentally, involved in certain impermissible practices, should try and forbid the company from such impermissible practices in future at the annual general meetings of shareholders. Furthermore, they should convince other shareholders through mutual discussions too in order to garner their support during the meeting.
1.7 In case, interest is a part of the profits earned by the company in a fiscal year and it''s quantity is known, then it should be deducted from the profits earned by the shareholders and should be given away in charity (sadqah) without expecting any recompense for it.
1.8 In case, interest is a part of the profits reaped by the company, thereafter the interest-included income is invested in a business venture, and profits, thus, earned out of it, then the interest shall be excluded from the profit earned proportionately and it should be given away as charity without expecting any recompense.*
1.9 A company is a legal entity, which represents the collective status of the shareholders. The Board of Directors is a group of people elected by the company, which expends on behalf of the company and in this way enjoys the status of an authorised representative of the shareholders. Moreover, it is incumbent upon all the shareholders to share the liabilities of expenditure of the Board of Directors; provided they are in conformity with the rules and regulations, laid down by the company.
1.10 It is quite right to trade in the shares of those companies, which undertake, solely, permissible business.
1.11 The future sale, the prime objective of which is not meant to buy shares rather to neutralise their losses and gains with fluctuating values of shares is actually an interest-bearing business. It is quite invalid in the eyes of Islamic Shariah because it is an explicit and apparent form of gambling.
1.12 The forward sale in which the sale does take place but the actual implementation of the transaction takes place in future, is not a sale rather, is an agreement to sell. The actual sale would take place only after the offer and its acceptance on the scheduled date.
1.13 It would not be valid to sell off the shares before getting the share certificates in a cash/spot sale.
1.14 The shareholder becomes the legal and authorised holder of the shares, once he gets the share certificates. He can sell off his shares even if his name has not been endorsed with the company due to certain official impediments.
1.15 It is obviously proper to act as a broker in those transactions in which the buying or selling of shares is permitted. On the contrary, it is not permissible for a person to act as a broker in the transactions of those companies, which undertake any impermissible business.
1.16 An Islamic financial institution or the Muslims in general can purchase equity shares of such companies, which do purely Halal business.
1.17 Investing in share of such companies that undertake solely Haram business is totally impermissible.

Shariah Funds

Shariah Compliant Funds

STRUCTURE OF A SHARIAH COMPLIANT
INVESTMENT FUND


An investment fund can be structured based on the Mudaraba contract under which an investor (rabb al-mal) provides capital to another person/body (akin to a fund manager - mudarib), who uses their expertise to devise a suitable investment strategy.

Any profits generated by the joint enterprise are divided between the mudarib and the rabb al-mal in accordance with a predetermined formula(management and performance fees are permitted under the Mudaraba contract). If any financial losses occur,these will be borne by the investor to a maximum of his capital investment.

Conversely, the mudarib's loses are limited to that of his time and efforts if the venture is not profitable. Certificates evidencing the rabb al-mal's investment, such as shares in the company constituting the investment fund, can be issued in negotiable form akin to conventional fund practices.

Many of the basic collective investment characteristics applying to conventional investment funds also apply to Shariah compliant funds, including, the technical structure of the fund, the role of the fund's service providers and the appointment of a board of directors or trustee to take
overall responsibility for the fund.


The Mudaraba contract provides sufficient flexibility to structure a fund with broad investment criteria. However, there are certain overreaching principles of Shariah which need to be factored into a fund's investment strategy:


A. Riba


Shariah prohibits usury (Riba), which may be defined as exploitation by the owner of a product which another requires. The payment or receipt of interest is usury and therefore investment in entities involved in lending (or borrowing) are prohibited.

This will preclude investment in certain key sectors, such as conventional banking, even though the activity of banking is not, in itself, contrary to Shariah. Debt is frowned upon in the same way as the payment or receipt of interest. As a result highly geared companies will not constitute acceptable investments.

It was once thought that an absolute ban on companies relying on debt finance was a Shariah compliant investment fund's only way of ensuring compliance with this tenet of Shariah. Clearly, such a hard-line approach dramatically reduces a fund's investment pool.

Shariah has evolved and such a blanket prohibition no longer applies. Modern Islamic jurisprudence accepts a debt to equity ratio of 1:32. A fund offering a fixed or guaranteed return on capital
will be prohibited.

Rather a fund must link profit to actual earnings generated from the underlying assets. This should be made clear to potential investors at the outset in any marketing material. Notwithstanding the prohibition against Riba, investment funds can be structured which may make leveraged investments in underlying assets.

Such investments may be made within the confines of Shariah by utilising the diminishing Musharaka contract (see Lovells publication - Shariah, Sukuk and Securitisation, for more information).


B. Haram


It is well-known that companies involved in certain products and industries will, as a rule, constitute
forbidden investments. These are, principally, alcohol and the gambling industry, as well as entities engaged in illicit, immoral or dubious trade. Companies engaged in these or related activities (e.g. a restaurant where alcohol is sold and which makes up a large proportion of its revenue) may not form part of a Shariah compliant fund's investments strategy.


C. Maisir


Shariah imposes an absolute prohibition on gambling. This may extend to futures and options in certain circumstances. However, this area is currently being revisited by Shariah scholars to determine whether the traditional prohibition on futures and options is still justified.

SHARIAH COMPLIANT FUNDS


There are several types of Shariah compliant fund which manage to operate within the confines of Shariah. The most common forms of Shariah compliant funds and the techniques they utilise in their investment strategy are outlined below.


A. Commodity funds


A commodity fund derives income from the purchase and resale of commodities. However, it is strictly prohibited by Shariah to sell a commodity before it is actually owned. Therefore, short sales (as commonly entered into by traditional hedge funds) are not permissible. A product must be held physically, or at least constructively, before it may be sold. Therefore, forward sales are also forbidden
in most cases.


Nevertheless, the following contracts may legitimately be used by a fund of this type (or indeed any Islamic investment fund) to generate profits:


(i) Istisna'a is a contract of exchange that allows the deferred delivery of goods at a specified date. The contract relates to the production of made-to-order items and allows a manufacturer to fund the
production process by receiving the sale price of the produce up front. A detailed specification of the item to be produced must be agreed between the buyer and seller prior to the commencement of the production process. Once production has commenced, the contract may not be unilaterally cancelled. The consideration must be paid in full on the date the contract is entered into, otherwise the contract may be classified as a future and consequently prohibited.
(ii) Bay al-salam is a sale contract in which the buyer pays immediately against the deferred delivery of a specified amount of fungible (not uniquely identifiable) goods of a given quality at a given date in
the future. The contract is most like a forward contract, but is different in two material respects. In a
forward contract, exchange of the underlying goods and cash are deferred to the maturity date. The seller in a bay al-salam contract has full use of the cash from the time the bay al-salam contract is agreed. Hence the credit risk is on the buyer, whose exposure relates to whether the seller will fulfil its obligations – the reverse of a conventional forward contract. The other difference relates to pricing. In a forward contract prices are derived by considering, for example, what the benefits are to the buyer/seller of the assets by deferring payment and delivery rather than a contemporaneous deal in the cash market. However, the delivery price in a bay al-salam contract is the spot price minus a discount. The rationale being that the buyer must be compensated for credit risk exposure as
well as some performance flexibility.


B. Equity Funds


Profits in equity funds are generally derived from capital gains and dividends paid by investee companies. It is evident that on a strict interpretation of Shariah there are a limited number of companies in which Shariah compliant fund may legitimately invest. Most companies partake in interest-based debt finance and invest surplus cash in interest bearing bank accounts and other investments. There are currently two schools of thought regarding investments made in companies which, although
predominantly Shariah compliant, may incidentally breach Shariah (for example, the prohibition against Riba) from time to time as the company carries on its principal activities. The traditional school of thought was that every investor in a fund is a partner and impliedly consents to, and is responsible for, every transaction. Unless a company was engaged exclusively in halal practices, the concern was that each and every investor could be implicated by the dealings of the fund manager, whether or not the investors actually consented to these (or were even aware of them in any detail).The more contemporary school of thought adopts the view that investors are not partners in a fund but are
merely investors. Since no one investor has the power of veto, it would be wrong to ascribe responsibility to an individual for any particular transaction. This may allow some leeway to invest in entities which have merely incidental non-halal features, since investors will not be deemed under Shariah necessarily to have authorised the investment. Nevertheless, there is still a belief among Shariah scholars that investors should raise any concerns they have as to the running of the fund generally, or over pecific transactions, especially if the fund is thought to be straying away from Shariah principles. Clearly, this raises a practical issue given that most funds will be involved in
many different trades on an ongoing basis and it will be impracticable for investors to be kept informed of each and every one. It is widely believed that if a company is engaged predominantly in halal business, but earns interest on account, an equivalent proportion of any dividend paid to a Shariah compliant fund must be given to charity (purification), be it at the fund or the investor level. Some scholars believe the same concept of purification also applies to capital gains, to the extent that the
market price of the stock incorporates any discernible element of interest. It is also important that the company invested in owns at least some non-liquid assets, otherwise its securities will be classified as non-negotiable by Shariah. Opinion is divided as to the appropriate ratio of non-liquid assets to
liquid assets. It appears safe to say, however, that a company with at least 51% of non-liquid assets will be suitable for these purposes.


C. Murabaha Funds


Murabaha is a type of 'cost-plus' financing. Typically the fund in question will acquire goods and will resell them to a third party at their cost plus a fixed profit. As such the fund will not own tangible assets but will instead consist of obligations owed to it by third parties. The costs and profit margin must be agreed in advance. However, a Murabaha fund should always be closed-ended, since the fund will not actually own any tangible assets as such, and cash/debts are not classified as negotiable instruments by Shariah.

D. Ijara Funds


An Ijara fund will usually be established for the purpose of purchasing assets (property, machinery etc) and then leasing those assets to third parties in return for rental income. Wide use of this structure is made by real estate funds. Legal ownership of the assets remains with the fund as does responsibility for the management of such assets. A management fee will normally be paid to the
manager. It is important to bear in mind that with an Ijara fund, the assets that are leased out must be used in a halal manner. Furthermore, the leasing arrangement put in place between the fund and the lessees must comply with Shariah.

Shariah Compliant Stocks in India

Shariah Compliant Stocks in India

Here are few facts about Islamic Investment Opportunities in India.

There are two ways of getting profit in Islam

(1) which Islam permits (2) which Islam prohibits.

Islam has forbidden earning from interests. And has counted as big sin and among the big sins there is no which forbidden in this manner; that notice a war from Allah and his messenger. Can human being defeat Allah and his messenger?


In India Muslims are second largest population after Indonesia, Indian Muslims population estimated to be around 150, millions. Inspite of this India is routinely ignored in the vast majority of the books articles on the subject of Islamic banking and or investments.

Dow Jones has Islamic index, FTSE of Britain has not only Islamic Index but also a full fledge Islamic bank, but unfortunately there is not a single Islamic Product or an Islamic benchmark in Indian investment environment.


Even more bizarre India is not covered and not included for any of their research work by any Islamic institution or bank .although India is the big market for Islamic investments,and according to me no research work of any research institution could be complete without including India.

Although India has a good Islamic structure which provides opportunity of riba free investment and finance which gives us lots of benefit.

Yes, India is the second largest population of Muslims in the world after Indonesia. It is 150 Million and still we don’t have any Islamic Index. Dow Jones has Islamic Index.

Shariah Compliant Investments.

Here are the Shariah Compliant Investment Criterias.

Common people in our community believe that investment in stocks is prohibited. No it is not true. Indeed there are some kind of stocks, which might be prohibited but not all. So prominent Islamic scholars, and ulemas have defined all market instruments and after that they have permitted with some conditions to have investments in stock market and invest in it.

(a)The company’s activities should not include liquor, pork, hotel, casino, gambling, cinema, music, interest bearing financial institutions, conventional insurance companies, etc.

(b) The total interest bearing debt of the company at any point in time should remain  below one third of its average market capitalization during the last twelve months.

(c) Its aggregate of account receivables should remain below 45% of total assets.

(d) If company has any interest bearing income it should not be more than 10% in any condition.

While Shariah compliant investment avenues are now becoming available in most countries, India has not seen large-scale development.To gauge the scope of Islamic investment opportunities in the Indian stock market, it is imperative to examine stocks that conform to Islamic Shariah principles "Out of 6,000 BSE listed companies, approximately4,200 are Shariah compliant.

The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE.This figure is higher even when compared with a number of
predominantly Islamic countries such as Malaysia, Pakistan and Bahrain. In fact, the growth in the market capitalization of these stocks was more impressive than that of the non-Shariah compliant stocks.


The software, drugs and pharmaceuticals and automobile ancillaries sector were the largest sectors among the Shariah compliant stocks. They constitute about 36% of the total Shariah compliant stocks on NSE. Further on examining the BSE 500 the market capitalization of the 321 Shariah compliant companies hovered between 48% and 50% of the total BSE 500 market capitalization.

Shariah Compliant Mutual Funds

Shariah Compliant Mutual Funds

Here are few facts about Islamic Investment Opportunities in India.

There are two ways of getting profit in Islam

(1) which Islam permits (2) which Islam prohibits.

Islam has forbidden earning from interests. And has counted as big sin and among the big sins there is no which forbidden in this manner; that notice a war from Allah and his messenger. Can human being defeat Allah and his messenger?


In India Muslims are second largest population after Indonesia, Indian Muslims population estimated to be around 150, millions. Inspite of this India is routinely ignored in the vast majority of the books articles on the subject of Islamic banking and or investments.

Dow Jones has Islamic index, FTSE of Britain has not only Islamic Index but also a full fledge Islamic bank, but unfortunately there is not a single Islamic Product or an Islamic benchmark in Indian investment environment.


Even more bizarre India is not covered and not included for any of their research work by any Islamic institution or bank .although India is the big market for Islamic investments,and according to me no research work of any research institution could be complete without including India.

Although India has a good Islamic structure which provides opportunity of riba free investment and finance which gives us lots of benefit.

Yes, India is the second largest population of Muslims in the world after Indonesia. It is 150 Million and still we don’t have any Islamic Index. Dow Jones has Islamic Index.

Shariah Compliant Investments.

Here are the Shariah Compliant Investment Criterias.

(a)The company’s activities should not include liquor, pork, hotel, casino, gambling, cinema, music, interest bearing financial institutions, conventional insurance companies, etc.

(b) The total interest bearing debt of the company at any point in time should remain  below one third of its average market capitalization during the last twelve months.

(c) Its aggregate of account receivables should remain below 45% of total assets.

(d) If company has any interest bearing income it should not be more than 10% in any condition.

Thus, According to the Islamic religion, you can not invest in Debt Mutual Funds. Because Islam has forbidden earning from Interest.

Another opportunity is mutual fund which is based on 100% equity. These funds are invested in different sectors like IT, automobile telecommunication, cement and a few present in interest based financial institutes, almost 10 to 15 %.

So investor has to purify that amount from the profits. And also there are many sectorial funds which
invests only in a particular sector like automobile,Oil & Gas, etc

Thus, Sector Funds are the Best Funds as they Invest in particular sector companies so they fulfill the Shariah Compliant Criterias.

Islamic Investments

Islamic Investments

Can Islamic People (Muslims) Invest in the Stock Market?

The commonest myth in Islamic people is that, Investments in Stocks is Prohibited. In fact, one of my Senior friend who is a Muslim told me today morning that, I want to invest in the stock market but it is prohibited by the Islamic Religion.

Well, This is a Myth. The reality is different. Here is the Reality.

No it is not true. Indeed there are some kind of stocks, which might be prohibited but not all. So prominent Islamic scholars, and ulemas have defined all market instruments and after that they have permitted with some conditions to have investments in stock market and invest in it.

Shariah Compliant Investments.

Yes, This is known as Shariah Compliant Investments.


(a)The company’s activities should not include liquor, pork, hotel, casino, gambling, cinema, music, interest bearing financial institutions, conventional insurance companies, etc.


(b) The total interest bearing debt of the company at any point in time should remain
below one third of its average market capitalization during the last twelve months.


(c) Its aggregate of account receivables should remain below 45% of total assets.


(d) If company has any interest bearing income it should not be more than 10% in
any condition.

Well, Yes. You can invest in the stock market by following the above laws. If you follow the above laws, you can invest in the stock market. Not the all the stocks are prohibited by the religion.

While Shariah compliant investment avenues are now becoming available in most countries, India has not seen large-scale development.To gauge the scope of Islamic investment opportunities in the Indian stock market, it is imperative to examine stocks that conform to Islamic Shariah principles

"Out of 6,000 BSE listed companies, approximately4,200 are Shariah compliant. The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE.This figure is higher even when compared with a number of predominantly Islamic countries such as Malaysia, Pakistan and Bahrain.”

In fact, the growth in the market capitalization of these stocks was more impressive than that of
the non-Shariah compliant stocks.


The software, drugs and pharmaceuticals and automobile ancillaries sector were the largest sectors among the Shariah compliant stocks. They constitute about 36% of the total Shariah compliant stocks on NSE. Further on examining the BSE 500 the market capitalization of the 321 Shariah compliant companies hovered between 48% and 50% of the total BSE 500 market capitalization.

Make Money Blogging Free

Make Money Blogging Free

Blogging is probably the only business in the world that you can start for Free. I mean without doing any Investment. Let me give you my example.

In March 2008, I have first time launched “My Journey To Billionaire Club” on Blogger’s (Blogger.com) Free platform. It did not require any money to create a blog as everything was totally free. Creating a Blog on the Blogspot platform is totally free.

The only money I had to spend behind this business was my Internet Connection Bill and nothing else. After almost 2 years of Blogging, Today in 2010, this Blog is making $ 100 + every month for me as residual income. Means I don’t have to work any hard to to make this $ 100 every month because the content that I have already created on this blog is making money for me automatically without my any effort. All I have to work hard is to grow the income of this blog.

So What Does it mean? Well, it means that it is possible to start your own Business without doing any investment in the information age for free. Thanks to the Internet. Today whole the world is connected with the Internet and there are several money making opportunity on the Internet.

If you are the owner of the Authority blog in any Niche, than you can make tons of money by adding multiple Income streams on your Blog. The thing is that, you MUST be the owner of the Asset. If you own a valuable Blog which receives hundreds of thousands of web traffic every month than it is really easy to monetize this web traffic and make tons of money passively without any effort.

Any High School going kid can also make money blogging free in his/her teen age. In fact, many bloggers from all around the world have started their blogs from Scratch and today they are making 6 Figure Income in dollars from their blogs every year. They are running their blog business while travelling the world.

And that’s why I advise the young people to start their Blog Business as early as possible so that you can also enjoy the Dot Com Life Style.

Make Money Blogging AdSense

Make Money Blogging AdSense

Google AdSense is the amazing program on the Internet. In fact, anyone in this world can make a fortune from such an amazing program out of his/her passion. AdSense along with AdWords make US $ 20 Billion for Google every year. Yes, That’s a Billion.

And many bloggers around the world are making literally 6 figure income in dollars every year from their blogs. And after watching their staggering success, many people start blogging and put the adsense code on their blogs.

But just after few months, after watching the adsense revenue of $ 3.26 per month, they either stop blogging forever or ask me that, How to make money blogging from AdSense? I ask them, how many web traffic your blog receives every month?

They say well, few hundred page views a month.

Well, Now you can not expect to make thousands of dollars from your adsense account every month from just few hundred visitors a month. You need literally thousands of visitors every month to make significant amount of money.

This Blog receives 40,000 page views a month when I am writing this Article and it’s Google AdSense earning is $ 100+ every month. So now just imagine that how much web traffic it requires to make thousands of dollars every month? Hundreds of thousands of visitors from all around the world right?

Now, you will ask me that than what about those internet marketers who claim to make fortune from their blogs within few months? Well, They are liars. Nobody can make a fortune from blogs & adsense in just few months. It requires minimum 3-5 years. Yes, if you start blogging with huge capital and a team of expert writers than it is possible to make 5 figure income from your adsense account within few months but I don’t think that anyone in this world has ever started blogging in this way.

Because most of the bloggers are broke when they have started blogging. In fact, most of the people start blogging because they are broke or want to make some extra cash to pay their monthly bills.

It is possible to make 6 Figure Income from AdSense but for that, you will have to work hard and create such a huge content on your blog that it attracts millions of visitors every month. Than and only it is possible to make 6 Figure Income from your Blog via AdSense…!!!