Are Index Funds Halal? S&P 500, VOO & Halal Options

Last updated: October 26, 2026

Are index funds halal?

Not as a whole. An index fund buys every company in its index, sized by market value, and nothing in its rules removes a company for what it sells or how much it borrows. So the S&P 500 and the US total market indexes hold regular banks and insurers, and most broad indexes also hold tobacco, defence and heavily indebted companies. The Nasdaq-100 leaves out financial companies, but it still has stocks that fail screening or land in the doubtful pile.

The fund itself is fine. Owning a small slice of lots of companies through one fund is permissible. What makes it a problem is what's in this particular basket. That's why Shariah index funds exist: they start with the same companies and drop the ones that fail. If you'd like the stock-level rules first, read are stocks halal?

Is the S&P 500 halal?

No. We screened every holding of the Vanguard S&P 500 ETF (VOO) to AAOIFI standards, using the fund's 30 September 2026 holdings, and here's how it came out:¹

Index providers get a similar answer. The S&P 500 Shariah Industry Exclusions Index, which the SPUS ETF tracks, keeps "approximately 200" of the 500 companies once it adds some extra industry exclusions on top of the Shariah screen.³

What fails

AAOIFI Shari'ah Standard No. 21 (the rulebook most halal screeners use) sets three tests for a company whose main business is allowed. Its interest-bearing debt has to be under 30% of its market value (market cap). Same for its interest-bearing deposits. And income from prohibited sources has to be under 5% of total income.² If the main business itself is prohibited, the company fails before anyone looks at the numbers.

The S&P 500 stocks that fail outright fall into three groups:

• Banks and insurers: JPMorgan Chase, Berkshire Hathaway, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Citigroup and UnitedHealth (health insurance). Financials alone are about 9.5% of VOO by weight.¹
• Prohibited products: Philip Morris (tobacco), alcohol makers, casino operators.
• Debt and interest: the business is fine, but the debt or interest income goes over the limits. Oracle and Verizon are two of the biggest.

Doubtful stocks are a separate case. These are companies where more than 5% of revenue comes from things like advertising or mature-rated games: Microsoft, Amazon, Alphabet, Meta, Netflix, Walmart and Costco. Scholars disagree on them. Some investors keep them and purify, others leave them out. A plain S&P 500 fund doesn't give you that choice either way.

You can look up any single company with the stock compliance checker, for example JPMorgan or Apple.

Are VOO, SPY, FXAIX, VFIAX, VTI and QQQ halal?

None of them are halal as they are. The four S&P 500 trackers hold the same 503 stocks, so they get the same answer, and the total market and Nasdaq-100 funds aren't far off:¹

Holdings dates: 31 August 2026 (FXAIX), 30 September 2026 (VOO, VFIAX, VTI) and 23 October 2026 (SPY, QQQ). Each fund page shows the current holdings and the filtered version.

QQQ comes closest. The Nasdaq-100 leaves out financial companies on purpose, so only about 5% of it fails outright. But almost a third of the fund sits in doubtful stocks, which still rules it out as-is.

What about VTI? By count it does worse than the S&P 500, with only 30% of its 3,466 stocks passing, because the smaller companies it adds include lots of regional banks, insurers and companies carrying heavy debt.

Can you hold an S&P 500 fund and purify the haram part?

No, not under AAOIFI standards. Purification (giving away the small slice of income that came from prohibited sources) is only allowed for companies whose primary activity is permissible and that have a bit of incidental interest income or debt.² A bank, an insurer or a tobacco company is prohibited at its core, so it doesn't qualify. Donating a percentage of your VOO dividends still leaves you owning JPMorgan.

For the stocks that pass, purification still matters. Most of these companies earn a little interest on their cash, so you donate the part of your income that came from it. AAOIFI puts that duty on whoever holds the share at the end of the company's financial period, even if no dividend gets paid.² Halal ETFs usually publish a purification figure, so you don't have to work it out yourself.

Halal index funds you can buy instead

Each of these tracks a Shariah index. An index provider screens a big group of companies on business and debt, and the fund holds whatever's left. We go deeper, with live returns and holdings, in halal ETFs compared.

US-listed halal index ETFs

Searching for a "halal S&P 500 ETF"? That's SPUS. It starts from the S&P 500, keeps the Shariah-compliant companies and adds a few extra industry exclusions.³ Since launch it has returned 17.47% a year, against 14.01% for SPY over the same period. MNZL is cheaper and broader, though it only launched in November 2025.⁴

You pay for it in fees and concentration. SPUS charges 0.45% a year³ against 0.03% for VOO,⁵ so about $420 more per $100,000, every year. Its top 10 holdings make up 56.47% of the fund, compared with about 39% for VOO.¹ We get into this in the problem with halal ETFs.

Halal index funds in the UK

UK investors have more choice than US investors. You can hold all of these in a Stocks and Shares ISA on most platforms (the yearly ISA allowance is £20,000).⁶

The iShares and Invesco funds are based in Ireland, which cuts the US withholding tax on dividends from 30% to 15% at the fund level. More on that in taxes on stocks for international investors.

Canada

WSHR (Wealthsimple Shariah World Equity Index ETF, 0.50%) is the main Canadian-listed option. Canadian brokers also let you buy SPUS, MNZL and HLAL.

A filtered S&P 500: the Amal approach

Every fund above asks you to give up the one you wanted. You swap a 0.03% S&P 500 fund for a 0.45% fund on a different index, with different concentration. If you'd rather keep your index and just take out what's haram, Amal builds a filtered version of the fund in your own brokerage account.

Here's how it works:

1. Pick a fund: VOO, SPY, FXAIX, VFIAX, VTI, QQQ or most other popular ETFs and mutual funds.
2. We screen every holding to AAOIFI standards. Amal's screening methodology is certified by Amanah Advisors.⁸
3. The stocks that fail come out and the rest get reweighted. You decide whether doubtful stocks stay or go.
4. You buy the remaining stocks directly in your broker account. No yearly expense ratio on top.
5. We re-screen holdings twice a month. If a stock becomes non-compliant, Amal follows the policy you set for that fund: sell it, wait for the next report, or just notify you. See when a holding stops being halal.

Each /fund page above shows what the filtered version holds and how it's done against the original.

There are trade-offs. You own a few hundred individual stocks instead of one fund unit. The filtered fund tracks the original closely, but not exactly, since it leaves out about 23% of the S&P 500 by weight (about 43% if you drop doubtful stocks too). And the plan matters. Filtered versions of funds like VOO, SPY and QQQ are on the Pro plan ($999 once, through Alpaca), while the Standard plan ($249 once) covers our Grow and Save portfolios. Both are one-time payments with a 30-day money-back guarantee.

FAQ

Are index funds halal?

Regular index funds aren't halal, because they hold every company in their index, including banks, insurers and companies that fail the debt and income tests. Shariah index funds like SPUS, HLAL, ISWD and the HSBC Islamic Global Equity Index Fund are halal by design, since their index has already dropped those companies.

Is the S&P 500 halal?

No. Of the S&P 500's 503 stocks, 254 fail AAOIFI screening outright and 16 are doubtful. Only 232 pass.¹ So the index as a whole isn't halal, even though more than half of it by weight is in stocks that pass.

Is investing in the S&P 500 halal?

Buying a standard S&P 500 fund isn't halal under AAOIFI standards, because you end up owning banks and other prohibited businesses. You can still invest in the halal part of the S&P 500, either through SPUS, which tracks the S&P 500 Shariah index, or through a filtered version of an S&P 500 fund.

Is VOO halal?

No. About 23% of VOO by weight fails AAOIFI screening outright, and another 20% is doubtful.¹ The halal VOO page has the full holdings list and the filtered version.

Is VTI halal?

No. Only 1,045 of VTI's 3,466 stocks pass AAOIFI screening, and about 26% of the fund by weight fails outright.¹ See the halal VTI page.

Is there a halal S&P 500 ETF?

Yes. SPUS (SP Funds S&P 500 Sharia Industry Exclusions ETF) tracks about 200 Shariah-compliant S&P 500 stocks and charges 0.45% a year.³ In the UK, ISUS (iShares MSCI USA Islamic UCITS) covers big US companies, but it uses an MSCI index instead of the S&P 500.

Does Vanguard have a halal ETF?

No. Vanguard doesn't offer a Shariah-compliant ETF or index fund. You can hold SPUS, HLAL or MNZL in a Vanguard brokerage account, or use a filtered version of a Vanguard fund like VOO, VFIAX or VTI.

What are the best halal index funds in the UK?

For global exposure, the main two are ISWD (iShares MSCI World Islamic, 0.30%) and IGDA (Invesco Dow Jones Islamic Global Developed Markets, 0.40%). ISUS (0.30%) is US only. The HSBC Islamic Global Equity Index Fund (0.62% for class BC) suits people who'd rather have a traditional fund than an ETF, but it only holds 100 companies.⁷ You can hold any of them in a Stocks and Shares ISA.

Is QQQ halal?

No, but it's closer than the S&P 500. Only about 5% of QQQ fails outright, because the Nasdaq-100 leaves out financial companies. Another 30% is in doubtful stocks like Microsoft, Amazon, Alphabet and Meta.¹ See the halal QQQ page.

Can I buy an S&P 500 fund and donate the haram portion?

Not under AAOIFI standards. Purification only works for companies whose main business is allowed.² Giving money away can't make a stake in a bank or a tobacco company halal.

Choose your next step

• Compare fees, returns and holdings of every halal ETF in halal ETFs compared.
• Read about the costs and concentration of halal ETFs in the problem with halal ETFs.
• Learn the stock-level rules in are stocks halal?
• See the filtered version of VOO, SPY or QQQ.

References