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An Islamic perspective on short selling

An Islamic perspective on short selling

“Sell not what you do not own.” – Prophet Muhammad (peace be upon him) We have been fielding some questions from clients regarding GameStop and other extreme market action in recent weeks. Here’s our list of frequently asked questions on the subject. It’s designed to help our clients through these strange times. Azzad’s portfolio managers do not have exposure to GameStop or other names that have been influenced by coordinated moves from retail investors. As you might expect, the small size of those stocks and their generally lower quality do not make them likely candidates for ownership. It isn’t GameStop’s meteoric rise (and subsequent decline) that we want to focus on, though. It’s the target of those retail investors who used social media to bid up prices and hammer Wall Street traders: hedge funds. Specifically, let’s address short selling, the strategy hedge funds used to make money from names like GameStop before retail investors decided to push back. At Azzad, we do not allow short selling by our portfolio managers, in keeping with the principles of Islamic finance and investing. Short selling is frowned upon by our scholars, some of whom liken the practice to gambling or speculating. Basically, short

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