Stock trading
السلام عليكم ورحمة الله وبركاته
My prayers are with the Bangladeshi people affected by the floods. May Allah (SWT) ease their suffering.
I also pray for our brethren and sisters in Palestine. May Allah (SWT) ease their suffering as well.
Ameen.”
I received multiple messages from people on my phone and I am trying to address some of their questions here to clear off some misconceptions.
Stock trading is one of the fastest ways to grow your wealth. It is also the fastest way to lose it. But if you have ever heard phrases like:
- “Its pure gamble”,
- “It is haram to trade in stocks”,
- “you need large investments to make money in the stock market”.
- “It is too late to get started”
I am here to clear off some of those doubts.
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“Stock trading is Haram”
Buying a stock is akin to buying a part of the business. If the business you deal with itself is haram (e.g., liquor, interest, marijuana, casino), then your whole investment will be considered haram. The key is to ensure the business aligns with Islamic principles. Focus on companies that contribute positively to society.
2. “It is a pure gamble”
It becomes gambling only when you lack knowledge. To invest wisely, you must understand:
- What the company you’re buying does
- Their current fundamentals (We will discuss this in another thread)
Would you open a business franchise without knowing what you’ll be selling? Similarly, don’t invest without proper knowledge.
3. “you need large investments to make money in the stock market”
This is one of the biggest myths we unfortunately encounter in our society. The key is to maintain consistency (Istiqamah) in everything we do.
Abu Huraira reported: The Messenger of Allah, peace and blessings be upon him, said, “Take up good deeds only as much as you are able, for the best deeds are those done regularly even if they are few.” (Sunan Ibn Mājah 4240)
We can apply this hadith to our investments. If you’re investing with a purpose to better your life and help society, it is indeed a good deed too.
Advantages:
1) Learn to be Disciplined through Investments.
The biggest and most important reason to learn the fundamentals of trading and investments is to help us become disciplined individuals. Any kind of regular investment will help a person become more disciplined in their approach to money handling. We don’t have to start with hundreds of thousands of dollars to see results. We can start small and build as we go. Remember, Rome wasn’t built in a day. ( It is on my list of next destinations to see by the way إن شاء الله ).
2) Financial Freedom :
Imagine a life where you’re free from financial worries – no need to work a job you dislike, report to difficult bosses, attend tedious meetings, or miss important family events. This isn’t just a dream; it’s a possibility that smart, halal investments can help you achieve.
In our ummah today, we often see three types of people:
a) Borrowers: Those who live by “Forget about tomorrow, let’s enjoy today.” Their lifestyle is built on credit cards, expensive vacations, and hefty loans. Remember, the Prophet Muhammad (ﷺ) sought refuge from debt, saying, “O Allah, I seek refuge with You from sin and debt.” (Sunan an-Nasa’i 5474)
b) Consumers: Slightly more prudent, they spend what they earn. While avoiding debt, they don’t save or invest for the future. Many of our Muslim brothers and sisters fall into this category.
c) Keepers and Investors: These wise individuals understand that “Debt is dangerous, and merely earning to spend leads nowhere.” They focus on accumulating wealth over time, investing a portion of each paycheck. This is the group that achieves financial freedom, using the stock market and other halal investments to grow wealth, bi’ithnillah (with Allah’s permission).
To attain financial freedom, we must strive to be in this third category. With effort and discipline, anyone can progress from being a borrower to becoming a keeper and investor.
Remember, the goal of financial freedom isn’t to hoard wealth or indulge in luxury. Rather, it’s to free ourselves from financial constraints so we can better serve Allah, our families, and our communities. As the Quran reminds us:
“But seek, through that which Allah has given you, the home of the Hereafter; and [yet], do not forget your share of the world. And do good as Allah has done good to you.” (Surah Al-Qasas, 28:77)
Note: Achieving complete financial independence through trading takes time and effort. I’m still on this journey myself, but in sha Allah, I aim to make trading my full-time occupation soon.
3)“The magic is in the Compounding”
Example one :
If you invest $ 100 dollars every month into a company that is growing at 10% each year. At the end of 10 years, you would have $ 23,350.41
Example two: If you invest $ 200 dollars every month into a company that is growing at 10% each year. At the end of 10 years, you would have $ 46,667.82
Example three :
If you invest $ 200 dollars every month into a company that is growing at 10% each year. At the end of 20 years, you would have $ 200,000
Example four: Just increase 100 more dollars to $ 300 dollars every month into a company that is growing at 10% each year. At the end of 20 years, you would have $ 300,000
Now, $300 divided by 30 days is just $10 a day. That’s equivalent to two Starbucks coffees. Perhaps consider making your coffee at home and investing the difference!
Don’t fall for the old cliches
If I only knew then what I know now.
- We are too soon old and too late smart.
- Youth is too precious to be wasted on the young.
- With inflation rates at about 8% last year.
4) It is too late to get started – Stock market
With inflation rates at about 8% last year, it’s crucial to grow your wealth wisely.
It’s Never Too Late to Start
The biggest excuse I hear is that it’s too late to start – we’ve missed opportunities like Google, Amazon, and Netflix in their infancy.
For all these people, let me give you an example of a man:
Born an orphan, whose life took a turn at 40 years old, who migrated to a different city without any means at 53, conquered the city from which he was forced to leave his hometown at 61, and then illuminated this world before his departure.
Yeah, Its never too late to get started.
