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September 10, 2025Open Access

How Can Sharia-Compliant Investments Minimize Risk Without Sacrificing Returns?

APAmelia Prameswari DMDina Yeni MartiaState University of Semarang MRMuhammad Rois

Key Points

The SIM portfolio provides higher returns with lower risk, confirming the effectiveness of sharia-based portfolio optimization.
Using 30 companies, stock performance was analyzed based on daily closing prices and various return proxies.
The CAPM portfolio offers returns similar to individual stocks, yet it achieves this with reduced risk for investors.
Findings highlight valuable insights for financial strategies that adhere to sharia compliance, fostering sustainable investments.

Abstract

This research examines how sharia-compliant investments can minimize risk without sacrificing returns through portfolio optimization. Using the Single Index Model (SIM) and Capital Asset Pricing Model (CAPM), this study evaluates the performance of stocks in the IDX Sharia Growth index from November 2022 to October 2024. Data from 30 companies were analyzed, with stock returns based on daily closing prices, Bank Indonesia Certificates as a proxy for risk-free returns, and the Composite Stock Price Index for market returns. Stocks were ranked based on Excess Return to Beta (ERBi), and the optimal portfolio was determined using the cut-off rate. The results show that the SIM portfolio (12 stocks) offers higher returns with lower risk, while the CAPM portfolio (15 stocks) provides similar returns to individual stocks but with lower risk. The findings confirm that sharia-based portfolio optimization effectively reduces risk while maintaining returns, providing valuable insights for investors seeking sharia-compliant financial strategies.

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