Which Islamic Stocks Portfolio Should You Invest In?
Stock portfolios, also known as stock funds, are carefully curated collections of stocks designed for a specific investment objective. These can be sector portfolios, specific-sized companies (large, medium, or small), or regions (domestic or international). However, the most important ones for investors to know are growth portfolios and income portfolios. That is because they fit different stages of life differently and make it very simple for the investor to choose. Growth portfolios are aggressive and fit younger people or people with long-term investment objectives. In contrast, income portfolios are conservative and fit people close to or in retirement or with short-term investment objectives. Middle-aged people can combine the two portfolios in different percentages to be moderate.
Stock portfolios should be a collection of at least 25 stocks. Each stock should be studied carefully with a detailed fundamental analysis and a macro look at the sector and the economy. The portfolio should be diversified between sectors and within every sector so it does not suffer much if one sector is not performing well. No single stock should be highly weighted (no more than 5%), and no sector should be highly concentrated. The percentage of every stock in the portfolio is based on correlation and an analysis of the collective risk and return. To summarize, the portfolio should be diversified and balanced.
The portfolio should be constantly monitored for stocks or sectors that are not performing well and for the effect of the economy. The percentages can also get off balance as prices change and must be rebalanced periodically.
Islamic portfolios follow the same process, in addition to screening every stock to ensure its compatibility with Islam. Most Islamic investment companies have a growth fund and an income fund.
Building and monitoring a portfolio is a very complicated process. Therefore, it's highly recommended that investors buy a balanced portfolio, such as a mutual fund or a portfolio built by a professional.
At Zaki Financial, we have a growth model and an income model that are diversified, balanced and built by professionals.. Most investment companies offer the models, but it's up to the investor to decide which one to invest in. Zaki Financial goes another step further and makes it easier for investors to choose by mixing the growth and income models into five portfolios according to the investor risk tolerance
Conservative portfolio: 100% income model
Moderate conservative portfolio: 75% income model and 25% growth model
Moderate portfolio: 50% income model and 50%
Moderate aggressive portfolio: 25% income model and 75% growth model
Aggressive portfolio: 100% growth model
Because our accounts are separately managed and not mutual funds or ETFs, we are able to mix other percentages and even exclude certain stocks from the investor portfolio based on personal preferences.