Supernnuation Halal investments considerations

ٱلسَّلَامُ عَلَيْكُمْ 
Like any other type of investment vehicle, superannuation funds can earn halal income by making investments in Shares, properties and ventures that adhere to Islamic standards. Here are several measures and things to think about that superannuation funds can do to make sure their investments are Halal:
1. Sharia-Compliant Investment Screening: Superannuation funds can implement a rigorous screening process to identify and invest in companies that operate in accordance with Islamic principles. This process involves excluding businesses involved in prohibited activities such as alcohol, gambling, pork, and interest-based financial services.2. Ethical and Socially Responsible Investments: Many superannuation funds offer options for socially responsible and ethical investments. These options often align with both environmental and ethical considerations, and they can also be tailored to meet Islamic finance criteria.

3. Sukuk Investments: Sukuk are Islamic bonds that comply with Sharia principles. Superannuation funds can invest in Sukuk issued by governments or corporations. These investments provide returns based on profit-sharing arrangements rather than interest.
4. Equity Investments: Superannuation funds can invest in equity funds or stocks of companies that adhere to Sharia guidelines. This involves analyzing financial ratios and business activities to ensure that the investments are Halal.5. Islamic Mutual Funds or Managed Funds: Some superannuation funds offer Islamic investment options, which include a diversified portfolio of assets that comply with Islamic principles. These funds are managed by professionals who specialize in Islamic finance.6. Real Estate Investments: Superannuation funds can invest in income-generating real estate properties that align with Sharia principles. This can include properties used for residential, commercial, or industrial purposes.

7. Engagement and Advocacy: Superannuation funds can engage with companies they invest in to encourage them to adopt more responsible and ethical business practices. This can involve advocating for better corporate governance, transparency, and social responsibility.8. Consultation with Islamic Scholars: Superannuation funds may seek guidance from Islamic scholars or financial advisors with expertise in Islamic finance to ensure that their investment strategies align with Halal principles.
It's crucial to remember that providing Sharia-compliant investment options necessitates thorough investigation, due diligence, and continual supervision. A superannuation fund's specific strategy will depend on its investment strategy, member preferences, duration of investment and the resources available for research and management.
Individuals interested in Halal investments through their superannuation funds should inquire about the options available and seek transparency about the investment strategies employed by the fund to ensure that they align with their ethical and religious beliefs. Advice should be sought from qualified financial advisors specializing in shariah complaint investment strategies.

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In Australia, a frequent sort of automobile finance arrangement is the novated lease. An arrangement involving an employee, their employer, and a financial business takes place. With this arrangement, a worker can lease a car while having the lease payments taken out of their pre-tax wages, which may result in potential tax savings. Novated leases are frequently used as part of salary packaging, which is a way to set up an employee's compensation to incorporate a variety of benefits.Here's how a novated lease works:

Employee, Employer, and Finance Company Agreement: An agreement is made between the employee, their employer, and a financing business. The loan firm provides the funds to purchase the vehicle, and the employee chooses the vehicle they wish to lease.
Lease Payments: The employee's pre-tax wage is used to make the lease payments, which cover the cost of the car and any related costs (including insurance and maintenance). This means that the employee uses their pre-tax income to pay for the lease, potentially resulting in tax savings. Care should be taken to make sure the tax savings are significant enough to warrant the transaction.
Ownership and Responsibility: While the employee uses the vehicle, the ownership remains with the finance company. At the end of the lease term, the employee typically has the option to purchase the vehicle outright or return it, depending on the terms of the lease agreement.
Employer Deductions: The employer deducts the lease payments from the employee's salary before calculating the income tax (pre-tax income), effectively reducing the employee's taxable income. This can result in lower income tax payable by the employee.
Fringe Benefits Tax (FBT): In Australia, employers are required to pay Fringe Benefits Tax (FBT) on the value of certain benefits provided to employees, including vehicles. However, in the case of novated leases, the FBT liability can be offset by the employee's lease payments.
Transferability: If the employee changes jobs, the novated lease can often be transferred to the new employer, making it a flexible option.

Novated leases can provide potential financial benefits to both employees and employers. Employees can access a new vehicle with potential tax savings, while employers can use novated leases as a part of their employee benefits package.

Interest is typically included in the cost of a novated lease, but the way it is factored in can vary depending on the type of novated lease and the finance provider. Novated leases can be structured in two main ways: with or without a finance interest component.

Fully Maintained Novated Lease (With Finance Interest): In a fully maintained novated lease, the cost of the lease includes not only the purchase price of the vehicle but also additional expenses such as insurance, maintenance, fuel, and often finance interest. The interest is calculated based on the financed amount and the lease term. This type of novated lease provides convenience by bundling all costs into a single regular payment. The interest cost is typically spread out over the lease term.
Novated Operating Lease (No Finance Interest): In a novated operating lease, there is no finance interest component. Instead, the lease payment covers the use of the vehicle and the associated running costs, such as insurance, maintenance, and fuel. At the end of the lease term, the employee has the option to return the vehicle or purchase it at its predetermined residual value. This type of lease is more like a rental arrangement and does not involve paying interest on the vehicle's purchase price.
When comparing novated leases, it's important to consider both the overall cost and the structure that aligns with your financial preferences and goals. If the lease includes finance interest, it's essential to understand the interest rate, as it can impact the total amount you pay over the lease term.

As paying and receiving interest on transactions is prohibited in Islam, and Sharia guidelines provide clear guidance on this matter, many Ulema recommend that if no other option to purchase a car outright is available, individuals may, after confirming with their local Alim (Islamic scholar), consider the no-interest option. When opting for the no-interest option, it is important for the individual to first explain their situation to the Alim, outlining why purchasing a more affordable car is not feasible and why the novated lease seems to be the most suitable choice. Only after thorough consideration and when no other purchasing alternatives, such as Islamic leasing, ride-sharing, using local transportation, borrowing a vehicle, or purchasing an affordable lower-value car, are viable, should the novated lease be considered."

It's important to note that novated leases involve complex financial and taxation considerations. Individuals considering a novated lease should seek advice from financial advisors or taxation experts to understand the specific implications and benefits based on their individual circumstances.

ٱلسَّلَامُ عَلَيْكُمْ 
When you buy a stock of a company, you own a part of the business. Let's say you like Harley Davidson bikes; you love to ride them and have owned them in the past. You've decided to start a business manufacturing bikes. However, this endeavor would be quite challenging due to the required funding, manufacturing expertise, labor, and time. But there's an alternative. You could partner with a company already in the bike manufacturing business. To do this, allocate your capital to the company by purchasing their shares.

By investing in their shares, you provide funds for the company's future development and research. This investment contributes to the company's growth in sales and profits. As the company becomes profitable, they share the profits with you, typically in the form of dividends. Additionally, being listed on the stock market enhances the company's reputation, attracting more favorable attention from investors due to its increased earnings. Consequently, this positive performance draws in new buyers interested in acquiring the company's stock.

Conversely, the supply of the stock will be limited, as fewer people will want to sell their stocks now. In fact, because the company is performing well, stockholders are likely to hold onto their stocks, causing the available supply to shrink. This scarcity of available stocks will drive up the stock's price. The opposite holds true if the company fails to generate substantial profits or if the profits fall below market expectations. In such cases, the stock's demand might decrease, leading to a decrease in its price.

ٱلسَّلَامُ عَلَيْكُمْ 
First, before you begin investing, ensure that you do not have any outstanding credit card debt. If you do, prioritize paying off the credit card debt. Doing so will save you 15-25% in interest payments, which exceeds the returns you can reasonably expect from investments in the stock market.

You'll need cash that you won't require for the medium to long term. This should be money you're comfortable losing in the event of a market crash of 20%-30% or more. The analogy is akin to buying a house; just as you don't expect to recoup your down payment within a year of purchasing a home, anticipate investing your money in the market for periods ranging from 2 to 10 years.

ٱلسَّلَامُ عَلَيْكُمْ 
I learned it the hard way, through trial and error. There are two considerations you have to take into account: What features and support are being offered? What are my costs and risks?

Regarding features, I would look for broker research reports, customer support, a call center, the iress platform, an easy-to-use interface, and the frequency of trading (day trading, which is not allowed in Islam, or long-term investing). When considering costs and risks, I would pay attention to custodial services, brokerage fees, buy-sell spreads, the possibility of orders not being filled, a comparison between online and phone-based customer support, investment security, order cancellation policies, and withdrawal and deposit charges.

The most popular brokers in Australia are CommSec, NABTrade, Interactive Brokers, SelfWealth, Stake, TradingView, IG Markets, and ThinkMarkets. The best in terms of features are CommSec and NABTrade. The best in terms of costs are SelfWealth and Stake. For new starters, CommSec and NABTrade are recommended. For seasoned traders, Stake and TradingView are great options. Interactive Brokers is a good choice for a balance of features and costs.
As for what I use, I have accounts with CommSec, NABTrade, TradingView, SelfWealth, ThinkMarkets, Stake, and Interactive Brokers. I use each one intermittently for research and placing trades.

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Here's a general comparison of the potential returns for bank accounts, shares, property investment, and balanced superannuation funds over a 10-year period:

1. Bank Account:• Returns: Bank accounts typically offer lower returns compared to other investment options. Depending on prevailing interest rates, you might expect nominal returns that are lower than the rate of inflation.• Risk: Low risk, but purchasing power may erode due to inflation.• Potential Return Range: 1% - 3% per year (approximate)• Highly liquid asset class, money available at call or locked in for a duration•Interest income taxed at marginal tax rates

Shares (Stocks):• Returns: Shares have historically offered higher average returns compared to bank accounts and property over the long term, but with greater volatility and can yield dividend income and capital appreciation over time.• Risk: Higher risk due to macro related events, market fluctuations and company-specific factors.• Potential Return Range: 7% - 14% per year (approximate)• Liquid asset class, investment duration depends on time duration of investment• dividend income taxed at marginal tax rates and may be eligible for imputation credits• gains subject to CGT
Property Investment:• Returns: Property investments can yield rental income and capital appreciation over time. Returns vary based on property type, location, and market conditions.• Risk: Moderate risk due to property market fluctuations and management considerations.• Potential Return Range: 4% - 8% per year (approximate)• Illiquid and investment durations vary from 5 -30 years• Rental income taxed at marginal tax rates and may be eligible for negative gearing credits• gains subject to CGT
Balanced Superannuation Fund:• Returns: Balanced superannuation funds invest in a mix of assets, aiming for a balance between risk and return. Returns depend on market performance and fund management.• Risk: Moderate risk due to diversification across asset classes.• Potential Return Range: 4% - 9% per year (approximate)• Highly tax effective, 15% to nil tax paid on earnings depending on client being in accumulating or pension phase• Income and gains are locked in till retirement or condition of release is satisfied
Keep in mind that these are approximate ranges and historical averages, and actual returns can deviate significantly. Additionally, different market cycles and economic conditions can lead to variations in returns over a specific 10-year period.

My home and rising interest rates

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An increase in interest rates can have several impacts on your mortgage and overall financial situation. The specific impact will depend on the size of the rate increase, the remaining term of your mortgage, and your personal financial circumstances. Here are some potential effects to consider:

1. Higher Monthly Mortgage Payments: The most direct impact of an interest rate increase is that your monthly mortgage payments will likely go up. This is because a higher interest rate leads to higher interest costs on your loan. If you have a fixed-rate mortgage, your monthly payments will increase during the remaining term of the loan.2. Increased Total Interest Costs: A higher interest rate means you'll be paying more interest over the life of your mortgage. This can significantly increase the total amount you pay for your home in the long run. It's important to review your amortization schedule to understand how much more you'll be paying in interest.3. Impact on Affordability: If your monthly payments increase due to higher interest rates, it could affect your overall financial situation and budget. You might need to allocate more of your monthly income to cover the increased mortgage payments, potentially impacting your ability to save, invest, or cover other expenses.

4. Reduced Buying Power: Higher interest rates can also impact your ability to qualify for a mortgage when purchasing a new home. This is because lenders use a portion of your income to determine how much you can borrow, and higher interest rates mean higher monthly payments, potentially reducing the amount you're eligible to borrow.5. Refinancing Considerations: If you have an adjustable-rate mortgage, an interest rate increase could lead to higher rates during the adjustment periods. This might prompt you to consider refinancing to a fixed-rate mortgage to lock in a stable rate.
6. Impact on Investments: If you have investments that are sensitive to interest rate changes, such as bonds, shares, the value of those investments could be affected by rising interest rates. Higher rates might lead to lower bond prices, potentially impacting your investment portfolio.

7. Economic Factors: Generally, higher interest rates can be a sign of a stronger economy. While this might mean improved job prospects and economic growth, it can also lead to higher borrowing costs for other loans, such as car loans or credit cards. The RBA may also increase the interest rates to curb higher inflation and to ensure that price growth (inflation) remains low and stable.To prepare for potential interest rate increases, consider the following steps:• Review your budget to understand how higher mortgage payments might affect your finances.• Set aside funds to prepare for interest rate changes.• Consider refinancing options if you have an adjustable-rate mortgage or if the increase is substantial.• Stay informed about the economic and interest rate outlook to anticipate changes.
It's important to remember that interest rates can fluctuate over time, so it's wise to be financially prepared for potential changes in the future. Consult with a qualified financial advisor, who can provide personalized insights into how interest rate changes might impact your specific situation

Important disclaimer:
These posts/articles were written without taking into account your objectives, needs, or financial situation, and they do not constitute financial advice nor a buy/sell/hold recommendation. Therefore, you should consult a financial advisor and determine whether the information mentioned in these posts/articles is appropriate for your financial circumstances, goals, and needs before acting on it. While every reasonable attempt has been made to ensure the correctness of the information shared, we cannot guarantee its accuracy, completeness, or currency. No legal responsibility is assumed for any mistakes or omissions, whether they were made intentionally or not. Read full disclaimer

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Supernnuation Halal investments considerations

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Comparing returns generated by bank account Vs shares vs property investment vs balanced superannuation fund over a 10 year period

My home and rising interest rates