Sunday, February 11, 2007

Poor Muslim-American Islamic-Investment Strategies

The topic of this posting and a recent khutba is the real "Islamic finance": How to maximize the good that one can do, or in our quasi-materialistic religious rhetoric, how to maximize our wealth of hasanat or good deeds.

In this regard, the Islamic canon clearly preaches a "financial planning" approach: start with your moment of death, and work your way with backward induction to current time. What are your goals? What are the resources and investment tools that you can use to attain those goals? What is the best investment strategy to have a wealth of good deeds in the final account?

Most of our sermons are about how to maximize earning of good deeds (better times to pay to charity, better times and places to pray, etc.). That is good. But then the analogy we seem to have in mind is one of the good deeds going into a checking account and sitting there until we have the accounting. But nobody ever got wealthy putting money in a checking account, no matter how much income that person was earning. So, while we should indeed maximize that income of good deeds, we should also invest it wisely if we are going to generate wealth.

So, let's approach the problem of Islamic financial planning. What does the canon tell us about the resource endowments on which we'll face accounting. Those are the same endowments that we can use to generate income, and then to invest that income to generate wealth. In the Hadith narrated by Mu`adh ibn Jabal, the Prophet (p) said: "No human's will move from his station of accounting until he is asked about four things: (1) his lifetime, how did he consume it, (2) his body, how did he wear it out, (3) his knowledge, how did he use it, and (4) his wealth, how did he earn it and how did he spend it."

So those are our four endowments: time (the most essential and most precious of all), physical existence, knowledge, and material wealth. Another Hadith, narrated by abu Hurayra tells us the three investment vehicles that we can use to make this wealth grow long after our time is up, our bodies are decaying, our knowledge is obsolete, and our wealth belongs to someone else. The Prophet (p) said: "When a person dies, his works stop except for three things: (1) perpetual self-sustaining charity, (2) useful knowledge, and (3) pious children who supplicate for their parents."

A good investment strategy would require three things. The first is that we have to work with what we've got. We shouldn't wait until our income is large in order to start saving and investing. We should start saving and investing with however little resources we have. Now, as American Muslims, we have no wealthy people. None of us can endow a Gates foundation to fight against aids or other epidemics. None of us can endow a Carnegie foundation and sponsor various types of research and information dissemination. On the other hand, we are collectively above average for the society in terms of income and wealth. That means that we have to act collectively in order to reach the critical mass required for the best investments in good deeds.

The second aspect of good investment is that we need to diversify our portfolio of moral investments. For example, if we ignore our children, what good are all the mosques we are building: little more than hollow buildings that are idle 99% of the time today, and likely to be emptier in the future. More importantly, when it comes to beneficial knowledge, why are we not sufficiently encouraging our children to be scientists -- where just one success, say in developing a cure for cancer, can save many more lives than any doctor can, even if the expected income of the doctor is higher than that of someone engaged in basic research? Why are we not encouraging them to be political scientists or historians, whose work educates society and helps to shape public policy in directions that save and improve lives in much more meaningful ways?

Finally, we should seek the highest return on our investments, subject to being sufficiently diversified. In fact, given the current portfolio of Muslim-American investments, we can increase the expected return and reduce risk simultaneously by diversifying away from the current wasteful strategy. Yes, of course, if you build a mosque you should expect to earn some good credits, but it is risky to have nothing but mosques, and the return on that investment is very small compared to other strategies.

I gave an example without naming specific projects. If you are in the process of putting together $3 million to build yet another mosque in Houston (we already have around 80 mosques for a Muslim population estimated to be around 100,000!). Yes, while we do not have wealthy Muslims, we have some rich ones, so 20 or more people can get together and build such a mosque. But think of the opportunity cost: You can use those $3 million to endow six scholarships for Muslim children who get admitted to top universities but cannot afford to pay tuition. In twenty years, you would have helped 30 young members of the community graduate from the best universities to become successful scientists, engineers, etc. Some of them may even get some crucial patents and generate some serious wealth that can be invested to do even more good: sponsor more research that can help humanity, etc. Having enabled that growth of good deeds decade after decade, and century after century, one surely would have invested today's good deeds much more intelligently that just building another structure.


Blogger Tariq Nelson said...

Excellent suggestion. I am going to try to get with some like minds on putting together a similar program like the scholarships you discussed

9:55 AM  
Blogger mnsiddiqi said...

gorakhpurmnI whole heartedly agree.Keep on saying the kalimat al- haqq ( word of truth).The day for shajarah tayyebah may yet come.
Mohammad Nejatullah Siddiqi

6:41 PM  
Blogger Sonia said...

there's a smart idea!

2:25 PM  
Blogger Abu Turab said...

Excellent post. Do you think awqaf can help in this regards (investing capital into direct projects to benefit communities instead of just building masajid).

Also, why do you think there's such a strong emphasis on building huge masajid?

6:52 PM  
Anonymous Anonymous said...

Los Angeles private equity is clearly an industry in a hurry – on just about everything except in admitting its own failings.But their were encouraging signs of humility yesterday from the new "masters of the universe", as committee chair John McFall dubbed private equity witnesses at the committee's first session.

4:07 AM  
Blogger Asad said...

Assalam Alaikum,
I am working on a post for my blog and the blog of a friend of mine on Islamic finance. Your blog is a great resource. Keep up the good work.

8:56 AM  
Anonymous Anonymous said...

black mold exposureblack mold symptoms of exposurewrought iron garden gatesiron garden gates find them herefine thin hair hairstylessearch hair styles for fine thin hairnight vision binocularsbuy night vision binocularslipitor reactionslipitor allergic reactionsluxury beach resort in the philippines

afordable beach resorts in the philippineshomeopathy for big with great mineral makeup bargainsmineral makeup wholesalersprodam iphone Apple prodam iphone prahacect iphone manualmanual for P 168 iphonefero 52 binocularsnight vision Fero 52 binocularsThe best night vision binoculars here

night vision binoculars bargainsfree photo albums computer programsfree software to make photo albumsfree tax formsprintable tax forms for free craftmatic air bedcraftmatic air bed adjustable info hereboyd air bedboyd night air bed lowest pricefind air beds in wisconsinbest air beds in wisconsincloud air beds

best cloud inflatable air bedssealy air beds portableportables air bedsrv luggage racksaluminum made rv luggage racksair bed raisedbest form raised air bedsaircraft support equipmentsbest support equipments for aircraftsbed air informercialsbest informercials bed airmattress sized air beds

bestair bed mattress antique doorknobsantique doorknob identification tipsdvd player troubleshootingtroubleshooting with the dvd playerflat panel television lcd vs plasmaflat panel lcd television versus plasma pic the bestThe causes of economic recessionwhat are the causes of economic recessionadjustable bed air foam The best bed air foam

hoof prints antique equestrian printsantique hoof prints equestrian printsBuy air bedadjustablebuy the best adjustable air bedsair beds canadian storesCanadian stores for air beds

migraine causemigraine treatments floridaflorida headache clinicdrying dessicantair drying dessicantdessicant air dryerpediatric asthmaasthma specialistasthma children specialistcarpet cleaning dallas txcarpet cleaners dallascarpet cleaning dallas

vero beach vacationvero beach vacationsbeach vacation homes veroms beach vacationsms beach vacationms beach condosmaui beach vacationmaui beach vacationsmaui beach clubbeach vacationsyour beach vacationscheap beach vacations

bob hairstylebob haircutsbob layeredpob hairstylebobbedclassic bobCare for Curly HairTips for Curly Haircurly hair12r 22.5 best pricetires truck bustires 12r 22.5

7:10 AM  
Anonymous Anonymous said...

Wholesale Nike Shoes, Wholesale Jordans, Wholesale handbags, Cheap Jordan shoes Jordan shoes Cheap Jordans for sale

: JORDAN SHOES WHOLESALE AIR JORDAN WHOLESALE WHOLESALE AIR JORDAN CHEAP NIKE SHOES CHEAP AIR JORDAN SHOES wholesale all jordan shoes,cheap jordan shoes ,We Wholesale Cheap Jordan Shoes, Michael Jordan Shoes, Nike Jordan Basketball shoes, Nike Air Jordan.Wholesale Air Jordans, Custom Jordans, Nike Air Jordan Shoes, Air Jordan shoes, Wholesale Air Jordans, Custom Jordans, Nike Air Jordan Shoes, Air Force ones. wholesale nike jordan shoes,nike air jordan shoes,sell nike shoes max,nike air force 1 shoesWholesale Nike Shoes, Wholesale Jordan, Air Jordan Air Jordans Nike shoes Jordan Shoes wholesale Jordan wholesale Jordans wholesale Nike wholesale Air jordans Air Jordan Shoes Wholesale Air Jordan cheap Jordan shoes Cheap air JordanWholesale handbags, Cheap Jordan shoes.Nike wholesale - Nike shoes wholesale. Wholesale Jordans, Cheap Air Jordans, Jordan Shoes, wholesale jordan shoes,wholesale ugg boots, cheap ugg boots, discount ugg boots.We wholesale jordan shoes and designer handbags

Jordan Shoes, New Jordan Shoes, all Air Jordans from Men and Women ...

we offer cheap Wholesale Ugg bootAir Jordans shoesUgg boot and new Air ...Air Jordan Air Jordans wholesale nike Air Jordan shoes,air jordans,nike dunks,air force ones ... shox oz shoes,nike shox nz shoes,Duck shoes,puma shoes,james lebron shoes ...Nike shoes Jordan Shoes wholesale Jordan wholesale Jordans holesale Jordans, Jordan Shoes, Air Max, Max 95, Max 90, Shox R4, Max TN, Goach Gucci LV chanelwholesale Nike jordan sneakersjordan retroUgg boots - cheap Jordan shoes Cheap air Jordan women Jordan shoesNike ugg boots - jordan air force air force onewholesale air force oneWomen's Training Shoes: ...Wholesale Jordans, Jair force one wholesale Air Jordans Shoes - Nike air force 1 shoes - Nike ... cheap nikecheap jordan- Job Searching: Technicalcheap jordanscheap jordan shoes air jor nike air jordan shoes -e ... nike air max 1 shoes, nike shox turbo sh ...dan retro Air Jordan shoes, Air Force Ones,nike air maxnike air force 1 Bagssell cheaperJORDAN SHOES WHOLESALE AIR JORDAN WHOLESALE WHOLESALE AIR JORDAN nike shox max jordan puma sneaker includes:air jordansnike air jordan Viii nike air force 1 shoes - air forcair jordan Xiii Verified Company, The most trustworthy Wnike air force oneJordan Shoes, Air Jordan, Air Jordans, Nike Shoes are cheap to buy ... - 5 visits - Nov 1Air Jordan retro shoes oes, ordan Shoes, Air Max, CHEAP NIKE SHOES CHEAP AIR JORDAN SHOES Max 95, Max 90, Shox R4timberland boot We specialize in selling Nike Shoesprada shoes Nike Shox and Air Max online since 2003, we offer cheap Air Jordans shoes and new Air ...

Nike Jordan, Air Jordan Shoes, Nike Air Jordan Shoes, Air Max Shox

Jordan Shoes : Nike Wholesale Jordans, Air Jordan Shoes and Nike Dunks are on sale here today; Wholesale Ugg Boots Nike Shoes you are looking for are availabe. Basketball Shoes include: Cheap Jordan Shoes, Nike Jordan Shoes, Wholesale air jordan Nike Air Jordans Shoes,Jordan Shoes Wholesale

Buy Nike Shoes: Wholesale Shoes like Air Force Ones Shoes, Cheap Air Jordan, Wholesale Nike Jordan Shoes, Nike Air Jordans Shoes, Jordan shoes, and many other Nike Shoes are reviewed, listed.

1:59 AM  
Anonymous Anonymous said...

I really would like some help paying my way through school...I'm forced to pay riba on loans because I don't have the money. If I don't go to school, I'll be stuck working jobs that are pretty haraam as well. So I'm trapped...Your idea is very good...

12:55 PM  

Post a Comment

<< Home