Many Muslims are insecure whether it is allowed to invest in the stock market or not. Basically it is permissible. Buying shares of a company means that investors are becoming shareholders and therefore share business-risks equally.But in either case the companies strictly have to comply with Shariah-principles.

So it's not easy to sort out in which companies to invest as you have to chose appropriate companies. Some industries and their financial instruments are inconsistent with Shariah-principles. The companies must not be involved in any kind in alcohol, pork-related products, conventional financial services (no interests), weapons and defense, entertainment (casinos/gambling, cinema, pornography,...),...

Sounds like a lot of research work to do. Moreover you have to be familiar with Shariah-law in order to invest according to your faith.

Instead of digging into this you could go for a professionally managed Islamic index fund. An index fund is a fund, which tracks and replicates the movement of a specific financial market such as the Dow Jones. A Shariah-board choses from a specific market appropriate companies, which conform with Shariah-law.

Only these companies will be part of the Shariah-compliant index fund. So whether the value of these companies goes up or down the index fund follows exactly the movements of all of these companies.

One of the advantages is you that invest in a diversified portfolio of Shariah-compliant companies. Moreover an index fund usually involves less management than a conventional mutual fund, which results in reduced costs and consequently higher return to investors.

So far there is only a limited number of Islamic index funds. One example of an Islamic index fund is the Dow Jones Islamic Market Index. But there are more index funds like

- FTSE Global Islamic Index
- MSCI Barra - Islamic Indices
- HK Islamic Index
- EW India Islamic Index
- Jakarta Islamic Index

Especially Dow Jones, FTSE and MSCI give investors a variety of different benchmarks tracking Islamic Indices for specific countries, regions or industries. So you can make your choice accord to your investment style.

TO GOOD INVESTMENT IN 2009!