Is it permissible to invest in indices like the dow jones and S&P 500?
2 Answers
That depends on whether the underlying businesses are halal, whose stocks constitute the index. Obviously it would not permitted to trade in stocks of breweries, casinos, interest based banks etc. There are 'shariah compliant' indices which you might consider.
The Dow Jones Index consists of 30 stocks. Some of them like American Express (Interest based), Goldman Sachs (Portfolio may contain Non-Halal Investments), Coca Cola (Sells Lemon-Do which is an alcoholic beverage) are not necessarily Shariah-compliant.
Similar is the case with the S&P 500 index.
If you are a conservative investor, it is recommended to opt for a Halal Index instead. Alternately if you are not risk averse, you can always invest directly in a stock instead of an index. I'd recommend sticking to large cap blue chip stocks for long term investments and mid cap stocks with a 10%-20% stop loss for medium term investments.
