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How to diversify your investment portfolio

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Everyone should diversify their investments this is because investing in only one type of asset and market could make your investments highly risky. Diversifying your investments could minimize your risk to the lowest, thus the losses made from one investment could be eliminated by the profit from another. There are various types of assets you can invest in; First of all, save in your halal bank account, shares (halal), properties (halal), gold (halal) and others (halal). The money you save in a halal bank account should cover you for one year of your living expenses. A halal bank account should not pay interest or give you profit if you are not assuming any type of risk of loss of money. However, an account whereby you have a risk of losing money or making profit is also halal but I prefer the former an account that pays nothing. The bank must use your money for halal investments. 

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O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write [it] between you in justice. Let no scribe refuse to write as Allah has taught him. So let him write and let the one who has the obligation dictate. And let him fear Allah, his Lord, and not leave anything out of it. But if the one who has the obligation is of limited understanding or weak or unable to dictate himself, then let his guardian dictate in justice. And bring to witness two witnesses from among your men. And if there are not two men [available], then a man and two women from those whom you accept as witnesses - so that if one of the women errs, then the other can remind her. And let not the witnesses refuse when they are called upon. And do not be [too] weary to write it, whether it is small or large, for its [specified] term. That is more just in the sight of Allah and stronger as evidence and more likely to prevent doubt between you, except when it is an immediate transaction which you conduct among yourselves. For [then] there is no blame upon you if you do not write it. And take witnesses when you conclude a contract. Let no scribe be harmed or any witness. For if you do so, indeed, it is [grave] disobedience in you. And fear Allah . And Allah teaches you. And Allah is Knowing of all things." Quran 2:282


After you have saved enough cash, you can now invest in other assets. The percentage you normally save should be used to invest in other assets. 30% of the money should be invested in gold (halal), or shares (halal) and  40% should go into savings (halal) that will be used to acquire a property(halal) when it is large enough to buy one. When investing in shares (halal) you must not only buy the shares (halal) of one company or one industry or one country. It will be highly risky to buy the shares (halal) sold in only one company or industry. However, you make sure you pay zakat as it  is obligatory by Allah and you could give charity (sadaqa) as Allah loves charity and He multiplies it for you in reward.

Make sure your business is halal. Give charity regularly from your income. Everything happens according to the will of Allah. Part of doing something for the sake of Allah also means hoping for a reward from Him

Halal means anything lawful Islamically. 


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