Halal vs Haram Instruments: A Cheat-Sheet

You have now learned the core principles of halal investing — no riba, no gharar, no maysir, and a focus on real ownership. This lesson pulls it together into a reference you can return to. Each instrument below is judged by the same test: does owning it involve interest, manufactured uncertainty, or a zero-sum bet — or is it a genuine share in something real? Bookmark this page.

The Halal Instruments

| Instrument | Why it is halal | Zakat rule | |---|---|---| | Shares of compliant companies | You own a real business earning real profit; positive-sum, not zero-sum. | 2.5 percent of market value (simplified) or of liquid assets (detailed). | | Sukuk (Islamic bonds) | Asset-backed — you own a slice of real assets or an income stream, not a loan at interest. | 2.5 percent of market value (treated like shares). | | Physical gold and silver | Real, tangible assets with no riba, gharar, or maysir. | 2.5 percent when held above nisab for a lunar year. | | Sharia-compliant mutual funds and ETFs | Professionally screened and purified so the filtering is done for you. | 2.5 percent of NAV (net asset value) annually. | | Islamic index funds | Track halal-screened company indices. | 2.5 percent of NAV. | | REITs (case-by-case) | Ownership of actual property; acceptable to many scholars if the REIT avoids excessive leverage and haram tenants. | Consult a scholar; most treat it like shares (2.5 percent of NAV). | | Real estate (rental) | Owning property and earning rent is permissible when the contract is clear and fair. | No zakat on the property itself; zakat on accumulated rental income above nisab. | | Business partnerships and private equity | If the business is halal and terms are transparent, owning a stake is encouraged. | 2.5 percent of your ownership value. |

The Haram Instruments

| Instrument | Why it is haram | Core reason | |---|---|---| | Conventional bonds | Interest-based loans; you are a creditor earning a fixed coupon. | Riba | | Fixed deposits and savings accounts | The bank pays guaranteed interest on money you lent it. | Riba | | Options (calls and puts) | Pure speculation; the whole value is a bet on price direction. | Gharar | | Futures contracts | Standardised bets on price moves, zero-sum between traders. | Gharar and maysir | | CFDs (contracts for difference) | You own nothing; you bet direction against a broker. | Gharar | | Margin trading | Borrowing to amplify trades; interest paid on the loan. | Riba | | Leveraged forex | Highly leveraged bets on currency moves; zero-sum. | Gharar and maysir | | Leveraged and inverse ETFs | Use derivatives to multiply moves; complex gharar underneath. | Gharar | | Conventional insurance | Interest-based reserves plus uncertain payout terms. | Riba and gharar | | Short selling | Betting a stock falls; zero-sum against other traders. | Maysir | | Intraday / momentum day trading | Holding minutes on price action with no fundamentals. | Maysir |

How to Read the Cheat-Sheet

Notice the pattern. Everything in the halal column survives the practical test from the gharar lesson: strip out the price bet and a real asset or productive activity remains — a business, a building, a bar of gold, a claim on real income. Everything in the haram column fails on one of three counts: it pays or charges riba (bonds, fixed deposits, margin), it is manufactured uncertainty with no real asset (options, CFDs, leveraged ETFs), or it is a zero-sum bet where your gain is another's loss (futures, short selling, momentum day trading). Many haram instruments fail on two counts at once, which is why leveraged forex and futures carry both labels.

A Few Key Notes

Crypto: The Debated Case

Cryptocurrency genuinely sits in a grey zone, and honest scholars land on different sides.

Some hold it permissible. They see a major cryptocurrency as a medium of exchange or a technology asset — closer to owning gold or a tech stock. If you buy and hold it as a store of value or use it in real transactions, they argue there is no inherent riba, gharar, or maysir.

Some hold it impermissible. They point out that many tokens have no underlying asset, no cash flows, and no intrinsic value — a price driven by sentiment and momentum, which is gharar, and frequently traded in ways that shade into maysir.

The prudent path. If crypto interests you, consult a scholar from your tradition first. Should you proceed, treat it like a commodity — hold for value rather than day-trading momentum — pay zakat on it annually, and stay clear of leverage and crypto derivatives. Because of this unsettled debate, Ansaar handles crypto as its own category rather than folding it into the equity halal screen.

Building Your Halal Portfolio

Start here:

1. Buy shares of halal-screened companies — the Ansaar screener and halal stocks page apply the two-step screen for you.
2. Diversify with Sharia-compliant index funds or ETFs if you want simplicity and lower cost.
3. Hold some gold or sukuk for stability.
4. Avoid anything with leverage, interest, or speculation.
5. Pay zakat annually — 2.5 percent of your portfolio's value.
6. Purify your dividends where a company has small impure income.

Avoid entirely: conventional bonds and fixed deposits; margin, leverage, and options; and momentum day trading detached from fundamentals. You can read how our screens are built on the methodology page.

Key takeaways

• Halal: compliant shares, sukuk, gold and silver, Sharia-compliant funds, Islamic index funds, and REITs (case-by-case).
• Haram: conventional bonds, fixed deposits, options, futures, CFDs, margin, leveraged forex, and conventional insurance.
• Each haram instrument fails on riba, gharar, or maysir — often two at once.
• Crypto is genuinely debated; decide with a scholar, treat it as a commodity, and avoid leverage.
• Build your portfolio from screened equity, diversify, hold some real assets, pay zakat, and purify — consult a scholar on close calls.

Quick quiz

Check your understanding

1. What is the halal alternative to a conventional interest-paying bond?

A fixed depositSukuk, which pay a share of real asset income instead of interestA call optionA leveraged ETF

2. Why do most scholars consider conventional insurance impermissible while permitting takaful?

Takaful is cheaperConventional insurance mixes riba and gharar; takaful is a cooperative pool built on Islamic principlesTakaful pays higher returnsThere is no real difference

3. Using the cheat-sheet's logic, why is a CFD haram?

It is too expensive to tradeStrip out the price bet and nothing real remains — it is manufactured uncertainty (gharar)It pays a fixed coupon (riba)It is a share of a real company

Try it

You have completed the core Islamic investing curriculum: what makes a stock halal, why riba, gharar, and maysir are forbidden, how to purify dividends, and how to pay zakat. To go deeper, read why we don't teach derivatives, or start applying it all with the Ansaar screener.