According to CNCBC, near the end of 2023, there was more than $6 trillion in cash sitting in U.S. money market funds.

While cash can play a role in a diversified portfolio, historically, cash has not kept pace with inflation. This means that dollars held in cash may lose purchasing power over time as prices rise. Higher interest rates these days have made CDs and other higher-yielding investments more attractive. And banks are aggressively pushing them on their customers. But are they appropriate for halal investors? The answer is no. Here’s why.

Islamic principles prohibit conventional bonds and other debt securities that generate interest income. Riba, or interest, is banned in Islamic finance. A CD, or certificate of deposit, holds a fixed amount of money for a set period. In exchange, the bank pays interest.

Instead, consider a halal fixed income investment like sukuk. Sukuk investments are halal because they seek to generate profit from the investment income of their underlying assets, instead of interest and principal payments. A halal fixed income fund like the Azzad Wise Capital Fund’s goal is to produce a return that is comparable to the return on bank accounts, certificates of deposits, and other such financial instruments (in which the Fund cannot invest) in keeping with the Fund’s halal investment guidelines.

Plus, because of the nature of CDs, once you put your money in, it is stuck there until maturity (unless you want to pay a hefty penalty) and you are stuck with the same interest rate. The Wise Capital Fund not only generates halal income but, since it is a mutual fund, you can withdraw your money anytime without such a penalty. Be sure to read the fund’s prospectus and summary prospectus for more information.