{"id":44985,"date":"2020-09-24T17:37:26","date_gmt":"2020-09-24T09:37:26","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=44985"},"modified":"2020-10-15T09:22:33","modified_gmt":"2020-10-15T01:22:33","slug":"successful-shariah-portfolio","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/successful-shariah-portfolio","title":{"rendered":"A Step-By-Step Guide To Building A Shariah Portfolio"},"content":{"rendered":"

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Heard about Shariah investments<\/a>, and keen on including them in your portfolio? Not only can they offer stable returns, they\u2019re also a great way for those who want to invest in a socially responsible manner.<\/p>\n

But how do you build a great Shariah portfolio? It\u2019s not all that different from building a conventional one. We\u2019ll take you through it step by step.<\/p>\n

<\/span>What is an investment portfolio?<\/span><\/h2>\n

First off, what is<\/em> a portfolio? It\u2019s just a way of referring to the collection of investments that you own. This is made up of a mix of different asset classes (equities, bonds, money market funds, mixed assets or other asset classes).<\/p>\n

Having a portfolio helps you plan for financial goals like buying your first home, affording your child\u2019s education, saving for travelling, retiring comfortably or performing religious activities such as umrah <\/em>or hajj<\/em>.<\/p>\n

<\/span>What\u2019s the difference between a Shariah and a conventional portfolio?<\/span><\/h2>\n

In a Shariah portfolio, its investments must comply with the Islamic law. They must adhere to certain ethical standards and cannot be involved in activities that are prohibited in Islam or have detrimental effects on society, such as gambling or alcohol. By contrast, a conventional portfolio does not have these restrictions \u2013 it only focuses on capital returns and income growth.<\/p>\n

Find out more about how Shariah investments differ from their conventional counterparts here<\/a>.<\/p>\n

<\/span>What is your risk profile?<\/span><\/h2>\n

Before you start building a portfolio, you\u2019ll have to know what your risk profile is. In other words, how much risk are you comfortable taking on when investing?<\/p>\n

Your retirement age also affects your risk profile. If you have many years left to retirement, you can generally tolerate a higher level of risk, as you have many years to recover from any short-term volatilities in the stock market. But if you are retiring soon, you may not be able to take as much risk, as you\u2019ll need to preserve your capital for retirement.<\/p>\n

Take this short quiz<\/a> to estimate your risk profile:<\/p>\n\n\n\n\n\t\n\t\n\t\n\t\n\t
Conservative<\/td>You want to safeguard your investment capital. As long as your capital is preserved, you\u2019re willing to accept low or minimal potential returns.<\/td>\n<\/tr>\n
Mildly conservative<\/td>You are willing to accept returns that are potentially higher than banks\u2019 fixed deposit rates, as long as your capital is exposed to minimal risk.<\/td>\n<\/tr>\n
Moderate<\/td>You are willing to take on a moderate risk to achieve potentially moderate returns.<\/td>\n<\/tr>\n
Mildly aggressive<\/td>You are willing to take on higher risk to achieve potentially high returns.<\/td>\n<\/tr>\n
Aggressive<\/td>You want to optimise for the highest returns possible. You are willing to take on a very high level of risk to achieve potentially high returns over the long-term.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

<\/span>How do you build a portfolio based on your risk profile?<\/span><\/h2>\n

The next step is to figure out what mix of asset classes you want to hold. This is referred to as your asset allocation. There are three main asset classes:<\/p>\n