Assalamu'alaikum and hello everyone,

When we talk about planning for our financial future – saving for our children's education, building a comfortable retirement nest egg, or simply growing our wealth – investing often comes into the picture. But as Muslims, a crucial question follows: "How do I invest according to my principles?" And closely related: "If I choose Shariah-compliant investments, will I lose out on potential returns compared to conventional options?"

It's a valid concern many clients bring to me at Modern Muslim Finance. We want to ensure our wealth grows in a Halal way, aligning with our values, but we also have real financial goals to meet. So, let's look at what the historical performance of Shariah-compliant indices suggests.

Can We Compare Performance?

First, getting a single, simple answer by looking at all Shariah indices is complex. There are numerous index providers (like MSCI, S&P Dow Jones, FTSE Russell) and they offer a vast array of Shariah indices – global, regional (US, Europe, Asia), country-specific (like Singapore!), sector-specific, and more. Furthermore, market returns change daily, and performance depends heavily on the timeframe you look at (1 year, 5 years, 10 years?) and the currency used.

What the Long-Term Trends Show (The Encouraging News!)

Despite the complexity, when we look at major, well-established global Shariah-compliant indices over longer periods (say, 10, 15, or even 20+ years), an encouraging trend often emerges: historical data frequently shows that these major Shariah indices have delivered long-term performance broadly comparable to their conventional counterparts (like the MSCI World or S&P 500).

To give you a concrete idea, here are some examples of annualized returns (usually in USD unless specified) based on publicly available data from major index providers around the end of April / beginning of May 2025:

Dow Jones Islamic Market World Index: Approx. 8.4% (10-yr), 10.8% (5-yr), 7.8% (3-yr)

MSCI World Islamic Index: Approx. 7.6% (10-yr), 12.9% (5-yr), 8.0% (3-yr)

S&P 500 Shariah Index (US Market): Approx. 11.5% (10-yr), 14.5% (5-yr), 10.7% (3-yr)

FTSE Shariah All-World Index: Approx. 13.1% (5-yr), 8.0% (3-yr)

(Important: Remember, these are specific examples from a point in time, published by index providers, and will change. They are not guarantees of future performance and are provided for informational illustration only.)

Why might performance be comparable, or sometimes even favourable on a risk-adjusted basis? Shariah screening often excludes highly indebted companies and certain volatile sectors like conventional finance. This can lead to potentially lower volatility (a smoother investment journey) and strong performance, especially when sectors like Technology and Healthcare (often well-represented in Shariah indices) do well.

Aligning Faith & Finance Goals

This suggests that choosing to invest according to your Islamic principles doesn't automatically mean you have to compromise your long-term financial goals. It supports our Modern Muslim Finance belief that you can plan to "Spend Guilt-Free, Live Worry Free and Retire Early" while staying true to your values.

Beyond the Numbers

While looking at index performance is interesting, remember it's just one piece of information. Building a sound, Halal investment strategy requires understanding your personal financial situation, goals, time horizon, and risk tolerance.

If you're curious about specific, up-to-the-minute index data, the websites of providers like MSCI, S&P Global (for S&P and Dow Jones indices), and FTSE Russell are good resources. However, data alone isn't a plan.

Making informed financial decisions that align with both your life goals and your Islamic values is key. Insha'Allah, by seeking knowledge and appropriate guidance, you can navigate your financial journey with confidence.

Important: The information and opinions in this article, including any performance figures cited, are for general information purposes only and based on historical observations or publicly available data as of a specific date. Past performance is not indicative of future results. Market conditions and index performance change constantly. This should not be relied on as professional financial advice or an investment recommendation. Readers should seek independent financial advice customised to their specific financial objectives, situations & needs.

Disclaimer: This publication has not been reviewed by the Monetary Authority of Singapore.