Q: Private pensions involve investment into the stock market, whereby, each person is required to select a level of risk they wish to undertake; low, medium, high. Is this risk halal?
The pension advisors mention that you may not receive the amount you invest (as a minimum) if you take a greater risk in investments.
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A: Risk can be both halal and haram. If an investment venture may possibly end with win-win, win-lose, or lose-lose outcomes then the risk therein is halal. It is actually risk that legitimises one making the return.
However, if the risk is equivalent to a zero-sum game with uncertain payoffs, i.e., one party’s payoffs cannot increase without decreasing the other party’s payoffs [i.e., only win-lose outcome] then the risk therein is haram and this is gambling. If one makes an investment and is always assured of the return of his capital then the absence of this risk renders the investment non-compliant with Shariah principles.