I was half kidding a few months ago when I suggested Islamic sharia law to shape up the stock exchange. It turns out I wasn’t far off. Apparently, Islamic investment funds have beaten the market of late. The two Amana Growth and Income funds beat the S&P 500 by 13% and 7% respectively.
The San Francisco Chronicle explains:
“Renouncing interest is the high-profile element of Islamic finance that relates to the current economic crisis. For Islamically correct investors, that means there are limits to how much debt a company can have or how much profit it can derive from interest-based investments. That criterion eliminated the possibility of holding stocks in financial services companies, like Citigroup or Washington Mutual, whose stocks lost 86 percent or all of their value last year, respectively.
Islamic finance also prohibits selling assets you don’t own, selling someone’s debt and engaging in high-risk investments. Thus, there was no participation in practices that have been blamed for Wall Street’s meltdown: complex derivatives trading, short-selling and the $30 trillion market in credit default swaps.”
posted October 22, 2010 at 3:50 pm
The above advantages of Islamic Finance like not dealing with complex financial deals rather robberies etc have saved Islamic Funds from falling like other general funds.
It has also been documented in a video, the link being
http://www.youtube.com/watch?v=XeQkY7DoY9U
Islamic Finance is more like Value based Investments, since it avoids high debt etc.
We at WealthCity in India http://www.wealthcity.in follow similar norms and found the Shariah returns are far better than conventional returns.