This article was first published in Islamic Finance news Volume 17 Issue 13 dated the 1st April 2020.

Aliredha Walji, Vice President, USA, studies the impact of downturns on halal investing, in this article featured in Islamic Finance news.

News of COVID-19 spreading worldwide has affected the markets. With market fluctuations like what we have been seeing over the past few weeks, the field of Islamic finance has not been exempted from the downturn. However, it has been protected from larger drops due to the avoidance in Halal investing of overly leveraged industries.

Still, in order to try and protect themselves further, some individuals may be inclined toward the possibility of timing the market. While this has its merits — it would be great if everyone could sell their holdings when the market is at its peak, and deploy cash reserves when markets hit bottom — it is actually very difficult, perhaps impossible, to time the market correctly each and every time. The best we can do is guess, which is why some people equate timing the market with speculating, which is not Halal.

So what are other ways for Muslim investors to protect themselves during the downturn?