Halal Investment Return Calculator

Sharia-compliant investing screens out sectors including alcohol, gambling, conventional interest-based finance, pork and weapons. Most screens then apply a second, quantitative test to the balance sheet: a company carrying interest-bearing debt or earning interest income above a set proportion of its market value is excluded even where its business activity passes. That second test is why the eligible universe shifts as share prices move, and why two funds applying different thresholds can end up holding different names. The compound arithmetic on this page is the same as for any other portfolio. Only the selection of what goes into it differs.

Quick example

With initial amount of 5,000 and monthly contribution of 200 (plus annual return of 6.5% and years of 20), the result is 116,366.42.

Which inputs matter most

Two of the four inputs dominate, and the comparison is clearest at a matched 10% change to each. At the defaults, stretching the horizon from 20 years to 22 lifts the final figure by 18%. Raising Monthly Contribution from 200 to 220 adds 8%. Raising Initial Amount from 5,000 to 5,500 adds under 2%, because that lump sum is a small share of everything paid in across 20 years. Adding a single point to Annual Return, from 6.5% to 7.5%, is worth 14% on its own. Time and rate compound against each other; the cash amounts do not.

What's happening under the hood

The opening balance and the contributions are grown separately and then added. The opening balance compounds for the full term at the monthly rate, which is the annual rate divided by 12. Each monthly contribution is treated as an ordinary annuity payment, compounding from the month after it is paid through to the end, so the final contribution earns nothing. At the defaults that gives 53,000 paid in against 63,366 of growth, meaning growth overtakes contributions somewhere inside the 20 years. None of this is specific to Sharia screening; the same arithmetic applies to any portfolio held at a constant assumed return.

Where this fits in planning

This is a "what-if" tool, not a forecast. It helps to test ideas: what happens to the result as the Initial Amount or the Monthly Contribution changes. Running several sets of figures shows how sensitive the result is to each input; a single set does not.

Where to go next

This calculation rarely sits alone. The compound interest calculator runs the same arithmetic with more control over compounding frequency and withdrawals, the investment fee erosion calculator shows what an annual charge removes from a figure like this one, and the Islamic finance EMI calculator covers the financing side rather than the investing side.