Fiqh Muamalat

Investing in Stocks

Investing in Stocks by Hadi Rofiee

When you buy stock, you buy part of the corporation that issued the stock, or offered it for sale in an initial public offering (IPO). As a stockholder, you have equity, or ownership, in the corporation. From an Islamic legal perspective, this is lawful because you become a partner in the business.

Your equity is likely to be small. Most corporation issues millions or billions of shares. As an individual investor, you’re likely to own hundreds or thousands of those shares, equal to just a fraction of 1% the company. But your equity gives you the right to vote on some of the company’s policy decisions and for the board of directors. And you can profit if the stock’s price increases, if the company pays you dividends, or a portion of its profits, or if both of those things happen.[1]Read More »Investing in Stocks