Dr. Monzer Kahf, a prominent economist and counsellor states: Trading stocks online or through brokers are similar from the point of view of their permissibility or non-permissibility. The matter is to select stocks that are permissible to buy and own.

The principle is: it is of course prohibited to do any amount of Haram, small or big. When you buy a stock you in fact become a partner with a voting right in the company and the management acts on your behalf and in your name, of course collectively.

But since the application of this principle in the Western markets practically prevents any investment in any stock, we have the revert to a degree of tolerance that removes the hardship. This is a matter of discussion and of course personal understanding, perception and judgment of individual investors and scholars. In other words, the relaxation of the rule is not determined by any Shari’ah standard but only guided by the principle that you loosen the knot to the needed extant that removes hardship and therefore by the perceived degree of tolerance. Here I feel that the following guidelines are relevant:

  1. avoid companies whose main line of business is not permissible, although they may have some permissible activities such as conventional banks and insurance companies, liquor , etc
  2. avoid companies that indulge heavily in non permissible activities such as companies that heavily speculate on future prices like the defunct Enron or companies that have high percentages of non-permissible income or assets used in non-permissible investments or depend heavily on interest-based borrowing.
  3. when investing in other companies, estimate, to the best of your ability, the percentage of capital gain and dividends that are generated by Haram activities and donate the same to Muslim charities because this money is Haram for you.