I currently have an investment (401k) account with my work where they have organized my funds with an investment company. I wanted to ask if these investment stocks are all halal. I’m not sure about all the diversification within each stock and would appreciate any help. Listed below are the stocks and their percentages.
US FIXED INCOME: 18%
INTL EQUITY INDEX: 16%
EQUITY INDEX GROWTH: 15%
EQUITY INDEX VALUE: 14%
S/M CAP EQUITY INDEX: 12%
S&P 500 INDEX: 9%
EMERGING MRKTS INDX: 7%
INCOME: 5%
US FIXINC SHORT DUR: 3%
REAL ASSETS INDEX 1%
This looks like a common mix for a 401k package. Each of these are funds or ETF composed of many stocks. I don’t know of a good way to make sure all stocks in those funds are halal. So what myself and others have done for a 401k account is to request to open a “Brokerage Link” account if offered by your employer. At least Fidelity calls it Brokerage Link. IDK if it’s the same name across the board. Once you open it and tranfer your funds to it, you can choose where to put the money and make sure you only invest in Halal stocks/funds.
The company administering the 401(k) will offer a few funds to choose from, and the employee can select what percentage they want to put into each. The challenge is that each fund will contain stocks for many companies, some of which may be Shariah-compliant and some of which may not be. It would be tedious to research each stock within a fund. Plus, some funds include bonds along with stocks; bonds are interest-based and not Shariah-compliant.
As Osama mentioned, it’s worth checking to see if there’s a self-brokered option that would give you more control over where your money is invested. Some people choose to opt out of a 401(k) and go the self-managed route with an IRA instead, giving the investor full control over where their money is invested. A downside of an IRA is that you lose any employer contributions towards the retirement account.
Thank you for your reply! I called and unfortunately my company does not offer a brokerage link with fidelity. Do you by any chance know what else I can do to make any changes with my diversification portfolio for my stocks? I’ve reached out to a representative who changed my percentages to mostly stocks and away from bonds, but now i seem to have the problem with stocks.
Thank you for replying! I’m looking for ways to continue through with a 401k considering my employer match. If you have any advice or previous experience on what can be done in my situation, I’d appreciate the help. It seems like I have no say in the diversification of my stocks.
I have heard of going for an IRA, but I’d like to try to keep my 401k shariah compliant and also get the advantage of employer’s match. Again, any advice would be greatly appreciated.
Hello Nada,
Can you also add the tickers for each of these funds. If they are public funds, it would be easier to see the holdings to check what % each fund is compliant or not.
Without checking, my guess would be none would be 100% compliant. 40-50% maybe.
Maybe someone can point to any scholar opinion on what to do if there are no compliant options and one does not want to lose both the employer match as well as the tax savings from the 401K (much higher than the IRA).
I haven’t tried this but it seems that at least some employers/plans allow you to roll over your 401k balance to an IRA while still employed. It may be worthwhile to find out if this is an option for you and what the requirements are. This way, you could get the company match (keep it as cash, in none of the offered packages) and periodically roll over to an IRA then manage it yourself.
Hi, thank you for your reply. From what I see, it’s saying “NAV”
I’ve contacted Mr. Joe Bradford on the types of stocks I should be investing in as well as how much I’d need to take out. He mentioned looking into their sectors and most are about 40-50% non-compliance. I was planning on going solely on S&P 500 Index so that calculations are easier, do you recommend this?
Salam, I ended up speaking with Mr. Joe Bradford about my situation. My company allowed me to self direct my 401k with the provided stocks so I’m going to invest in S&P 500 or something similar, in order to get the company match, and at the end of each year I get rid of whatever percentage of haram money that is made. Then I plan on making an IRA that invests in Amana funds/ halal stocks. In Shaa Allah