The (Suggested) 5 Steps Shariah-Compliant Investment Framework for every Singaporean Muslim

Before I kick-start this topic today, let me put a disclaimer first. 

This is purely based on my own investment preference, and it may not be suitable for everyone. Please exercise discretion based on your own personal circumstances and financial obligations that you might have.

With that out of the way, let me present you the concept.

The principal idea is essentially to build a strong, predictable and stable foundation while building a robust, flexible and diversified investments layered on top of it.

To put it simply, sort the basics first before exploring other riskier (and potentially higher returns) investments. Here’s a visual. 

Shariah-compliant portfolio. Halal investment guide.

In case you can’t see the image above, here are the 5 pillars I’ve laid out:

  1. CPF 
  2. Al Wadiah Savings Account 
  3. Islamic Fixed Deposits 
  4. Shariah-compliant ETFs / Robo-advisors 
  5. Shariah-compliant stocks or REITs

This framework is created with the current readily available investments in Singapore today, hence I sincerely believe it is doable and practical for everyone.

Without further ado, let’s go down into the details of each. 

[1] Central Provident Fund (CPF)

I’ve written about MUIS’s stand and fatwa on CPF here, in which CPF gains are considered as gifts (hibah). Whether we are in favour of it or otherwise, the CPF system is mandatory to all Singaporeans.

It is created mainly for these 3 essential things: 

  • Housing → using Ordinary Account (OA)
  • Retirement  → using Special Account (SA)
  • Healthcare → using Medisave Account (MA)

The current rates for each CPF account stands as below:

*This is based on your first $60,000 of combined CPF balances, with a maximum of $20,000 in your CPF OA.

So how shall we approach this? I Let’s delve deeper.

[1.1] Ordinary Account (OA)

CPF Ordinary Account (OA) is the best way to set aside a safety net for your mortgage payments.

As a rule of thumb, it is best to have at least 6 to 12 months’ worth of your monthly mortgage in your CPF OA.

Personally, I would go for 12-months worth in my CPF OA and the rest goes into my CPF Special Account (SA).

It serves as a good buffer in case you lose your job and it could service your monthly mortgage while your cash savings could be allocated for other daily necessities.

So for example, if your mortgage is $1,000 a month, do have at least $6,000 to $12,000 in your OA.

Additional good news for new couples.

If you’re looking to purchase a Build-To-Order (BTO) HDB flat, you may use your CPF to pay for the downpayment but set aside at least $20,000 in your OA.

Prior to the announcement in August 2018, buyers have to wipe out their balances in CPF OA fully before taking up a HDB loan.

The first $20,000 would bring you a 3.5% return per annum, which could go a long way in your retirement goals.

[1.2] Special Account (SA) 

Since it brings the highest return, consider maxing out the first $40,000 of your Special Account (SA) at 5% per annum.

Do note however that topping up your SA is a one-way process, meaning to say it is irreversible and you can only get that money upon retirement age (currently 55 years of age, as of writing).

CPF SA is one of the better ways out there to build your retirement plan quickly, which leads to my next point…

[1.3] CPF LIFE

A default annuity plan for Singaporeans, the CPF LIFE (an acronym for ‘Lifelong Income For the Elderly’) was introduced in 2009.

It was created to ensure our retirement plans are met, regardless of how long we live as the payout is paid out till perpetuity.

There are 3 level of retirement sums that are available today:

Note that those numbers are accurate as of 2020. Every year, the number increases by 3% to account for inflation, hence do your math on how much an amount would you need to save by 55 years old.

By being able to achieve so, you’re entitled to receive a monthly payout during your retirement years. The current monthly payouts, from age 65, are as such:

If you would like to know more about it, MoneySmart has come up with a comprehensive guide here.

[2] Al-Wadiah Savings Account

Essentially this is a direct alternative to your existing savings account.

I would imagine many readers here today have at least a DBS/POSB savings account to begin with.

I’ve explained about the types of savings accounts that you can consider in Singapore today here.

Instead of accumulating interests, why not credit your monthly salary to a Al-Wadiah Savings and earn hibah.

In my opinion, this is the easiest way to get things started towards your Shariah-compliant personal finance journey.

[3] Halal Bonds (Sukuks) or Islamic Fixed Deposits

Singapore used to have Halal Bonds (or Sukuks) back in the early 2010s, but it was discontinued. Nonetheless, we can consider Islamic Fixed Deposits in its replacement.

Some banks today such as Maybank, are offering Singapore Dollar Term Deposit-i and CIMB on Why Wait SGD Fixed Deposit-i.

In both examples, the returns are given upfront instead of upon maturity.

For the Singapore Dollar Term Deposit-i, you can get the maximum 2.05% profit rate per annum if you choose the 36-months tenure option.

CIMB’s Why Wait SGD Fixed Deposit-i has a profit rate of 1.10% per annum if you choose the 12-months tenure option.

Whichever options you choose, you will notice that both returns are better than the highly sought-after Singapore Savings Bonds (SSB) among Singaporeans.

If you’re a conservative investor and not planning to use a certain sum of cash for the next 12 to 36 months, this option will be a good addition into your portfolio.

[4] Shariah-compliant ETFs or Robo-advisors

Robo-advisors have been getting the headlines for the past couple of years or so, with the growing fintech industry in Singapore and globally as well.

Several are sprouting but one Shariah-compliant robo-advisor (possibly the only one so far) that is normally mentioned among Muslim retail investors is Wahed Invest.

Wahed Invest allows retail investors like us to have a global exposure in Shariah-compliant REITs, ETFs, individual stocks and even commodities like Gold, while doing most of the legwork on portfolio rebalancing to maximize returns and minimize risks.

Similar to other Robo-advisors, this is achieved through their proprietary algorithm to remove the human emotions in investing.

In return of its technology and service, there is a small sum of management fee annually which is the basis of their business model.

[5] Shariah-compliant stocks or REITs

If you are comfortable in reading and evaluating companies’ financial statements, you can consider buying stocks in companies via stock exchanges.

This requires some financial knowledge and what to look out for, such as the companies’:

  • Debt Ratio
  • Total Interest and non-compliance activities income
  • Account receivables and cash

One ‘shortcut’ to decide whether the company is Shariah-compliant or not, is to use the FTSE ST Singapore Shariah Index report as a reference. 

Note that they release the (partial) report on a quarterly basis.

Companies which are Shariah-compliant the previous quarter may not continue to be Shariah-compliant in the next, so you have to do the necessary homework too.

Owning individual Shariah-compliant stocks are the best way to get better returns in the long-term, if you do it well, and I would highly recommend having it as a portion in your portfolio.

In summary..

You may not necessarily need to have an equal allocation of your hard-earned money for all 5 pillars.

For example, if you would like to be more aggressive in your early investment journey, you may want to have more weightage of your capital in Shariah-compliant stocks or REITs for your portfolio.

Likewise, if you are a conservative investor and prefer to keep it simple and passive, you may consider putting your money to grow in Sukuks, Shariah-compliant ETFs or via Robo-advisor.

As a rule of thumb, remember, if you’re unable to sleep at night because of your investments means you’re taking more risks than you should.

This framework is fundamentally built to bring you a peace of mind 🙂

That being said, let me know in the comment section below if there are any steps here that you would follow or if you would approach this differently.


  1. Handsintertwined April 13, 2020
    • Khairul Ruzaini May 7, 2020
  2. Vikar June 1, 2020
    • Khairul Ruzaini June 7, 2020
      • Meer June 10, 2020
  3. Rizuan January 31, 2021
    • Khairul Ruzaini April 4, 2021
  4. Farid April 4, 2021
  5. Mel December 13, 2021

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