- Decide a budget. Understand where your money is going. Focus on budgeting/saving, THEN investing.
- Save 20% of your salary each month.
- Prioritize eliminating debt before investing.
- Contribute to 401K. Most employers match and there are tax advantages.
- Set goals for what you need (house, tuition, Haj).
- Invest. See our investment strategy.
- Create a monthly budget (rent, car payment, etc) and add a buffer for miscellaneous spending.
- Create a secondary checking account (won’t collect interest and no restrictions on transfers)
- Split your direct deposit paycheck. Budget goes to the main account and the rest in the other.
- Pay all expenses from your main account and forget about the other one.
- Have a big expense or emergency? Borrow from your other account.
ex. Salary $70K, paycheck after taxes and 401k: $4000
↘️ Main account: $3000↘️ Secondary: $1000
- Decide your [Islamic] principles and stick with them.
- Keep it simple and to what you know.
- Long term rather than short term.
Few things matter more in investing than understanding your own time horizon and not being persuaded by the price actions caused by people with different time horizons.
- Morgan Housel, The Reasonable Formation of Unreasonable Things{:target="_blank"} (a must short read)
We recommend reading The Psychology of Money{:target="_blank"} by Morgan Housel. It is critical to understanding the role of your behavior towards money and investing.
Shaykh Umer highly recommends SPUS.
If you want to see what Safeer invests in, his portfolio is public{:target="_blank"}.
You can invest alongside him. If you end up doing so, please subscribe to our investing newsletter{:target="_blank"} so you get the latest updates.
Safeer's basket of stocks contains:
- QQQ{:target="_blank"} - Top 100 Nasdaq weighted index of stocks. Nasdaq consists mainly of the top tech companies such as Amazon, Apple, Google, etc). He has added the top 65% of QQQ and filtered out the noncompliant stocks (based on Zoya).
- A few handpicked stocks across the technology sector that make up the remaining 35%.
Technology stocks have and will continue to perform well in the next few decades. These companies are fast growing due to the digital landscape and have much better profit margins.
Safeer also recommends some of the Amana mutual funds in addition to SPUS:
- AMAGX{:target="_blank"} - Amana Growth invests more aggressively, primarily in tech companies.
- AMANX{:target="_blank"} - Amana Income is a halal mutual fund that invests in stable, dividend-paying companies.
If you have a Fidelity 401K, see the 401K section on how you can invest in these there.
Zoya{:target="_blank"} - Find halal stocks
Should I buy individual stocks?
Index and mutual funds have historically performed better than a selected basket of stocks. It is highly recommended to invest most of your money in these types of funds.
When should I invest?
There will always be ups and downs - nobody can time the market. We recommend setting up automatic monthly contributions for majority of your investing budget.
Many focus only on the stock market when thinking about investing. Consider investing in other avenues such as real estate. Real estate forces you to be long term and there are many tax benefits. When evaluating rental properties and funds, prioritize cash flow with some appreciation rather than just appreciation.
The world is struggling from currency devaluation. For those in the US, buying Bitcoin may serve as a hedge against inflation. How Bitcoin materializes into an active-utilized currency is still to be determined but it could play a role in your portfolio.
A 401K is an account provided by employers for retirement that has many benefits and tax advantages. 401k’s are directly funded from your paycheck and many employers match contributions up to a certain threshold (typically 2-5%). Many 401k’s only allow you to choose from a handful of Vanguard funds. If this is the case, pick the most tech-heavy and equity-based fund. This will be the most sharia-compliant and long-term performing. If you can choose any stocks, see our recommended basket of stocks.
Make sure to contribute the minimum needed for your employer to match (it’s free money!). Note there is a contribution limit of $23,500 per year for 2025 (there are exceptions if you are over 50).
Is your 401K with Fidelity?
Fidelity 401K's are more flexibile in allowing you to choose your investments depending on your employer's plan. Fidelity allows you to create a BrokerageLink account associated with your 401K allowing you to invest in mutual funds and stocks beyond the basic target funds typically offered.
401K: Traditional vs Roth
There are two types of 401k: Traditional (pre-tax contributions) and Roth (post-tax contributions). Contributions to a traditional 401k can be deducted from your gross income in that year. However, you will need pay income tax when withdrawing at retirement. With a Roth 401K, tax is deducted upfront since you are contributing post-tax dollars. Roth 401k is great for young professionals as you will probably be earning more and in a higher tax bracket. You will also end up with a reduced zakah burden over time.
You can also individually open a Roth IRA but there could be heavy limitations in terms of contribution amounts and how much you earn ($236K married, $150K single adjusted gross income in 2025). If you are limited by the income, use the backdoor Roth IRA, where you contribute to a traditional IRA and then immediately roll it over to a Roth.
ESA accounts allow you to save for your children's education expenses. Once put in an ESA, money can grow tax-free - no taxes are paid on the gains. Contributions are limited to $2000 per year per child. You are only eligible for an ESA if your AGI (gross income after deductions) is less than: $110K for single, $220K for joint filers.
You can open an account with Saturna{:target="_blank"} and invest 50/50 in Amana Income (AMANX) and Amana Growth (AMAGX). We highly recommend setting up automatic monthly contributions once you setup the account.
Preferred options:
- Neeyah{:target="_blank"}*
- Ameen Housing{:target="_blank"}
Secondary preference:
We highly recommend using CharityVest{:target="_blank"} to streamline your donations through a Donor Advised Fund. CharityVest also makes it easy to donate stocks which allows you to take a deduction on the full market value AND avoid capital gain taxes from selling shares.
- Zoya's{:target="_blank"} (stocks, ETFs and mutual funds)
- ShariaWiz{:target="_blank"}
- Islamic Inheritance{:target="_blank"}
- MyWassiyah{:target="_blank"}
- A Continuous Charity{:target="_blank"}
Please email us. Email us to organize a halal personal finance session in your local community or your group of friends.
*Affiliated with Cordoba Funds, a real estate fund co-managed by the author, Safeer Mohiuddin.
Note: Any investment is speculative.
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