How Long Must Mutual Funds or Shares be Held Long-Term?

The concept of long-term versus short-term investments, especially about Zakat, can be subjective. 

While there is no strict technical definition from a Shariah perspective, these terms are used to distinguish between two main types of assets:

• Long-term investments:
• Purchased to generate steady income over time.
• Common examples include rental properties or dividend-paying stocks.
• The goal is usually to hold the asset for a prolonged period and benefit from regular returns, not immediate resale.
• Short-term investments:
• Acquired with the intention of capital growth or reselling for a profit in a shorter period.
• Examples include shares or mutual funds bought to sell at a higher price within a shorter time frame.
• The focus is on capital appreciation rather than long-term income.

Zakat Implications:

• Assets bought for capital growth or resale:
• These assets are subject to Zakat.
• The value of these assets is included in the Zakat calculation at the time of the annual due date.
• Assets bought for income generation:
• These assets are not subject to Zakat on their value.
• Only the income generated from these assets, such as rental income or dividends, is considered for Zakat purposes.

Thus, the distinction between long-term and short-term investments primarily depends on the purpose for which they are purchased. This intention determines whether Zakat is applicable based on whether the asset is for capital growth or income generation. 

And Allah knows best!

 Other Zakat Questions You May Have

• How to Settle the Full Outstanding Zakat Amount?
• Is a Full Year Necessary for Zakat to Become Important?
• Do I Pay Zakat on Money Lent to an Unreachable Borrower?
• Am I Liable for My Spouses or Children’s Missed Zakat?
• Is Zakat al-Fitr Required for an Unborn Child?
• Does a VAT Refund Require Zakat?