The toughest time to manage portfolios is during a down-trending market. During the volatile period of 2006 to 2011, Islamic indices have shown resilience by producing both higher returns and lower volatility compared to their conventional index counterparts.
Embedded in the Shariah investment process is a risk management facet that tends toward the selection of stocks with fundamental qualities that can potentially better withstand macroeconomic financial turmoil.
Although Shariah-compliant investing does not promise complete immunity against future black swans, it is a viable alternative to conventional investing.
Higher weightings in the basic materials, energy, health care, telecommunications, technology, and industrial sectors are expected to contribute to the strength of the Shariah investing approach, as opposed to a conventional investment portfolio, which typically has higher weightings in the financial sector.
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