Best Halal ETFs (Shariah-Compliant) in 2025 — Performance, Fees & Top Picks

tldr; SPUS is the best halal ETF for 2025, with the strongest performance record among US-focused Shariah-compliant funds. Its 0.49% expense ratio is high compared to conventional ETFs but justified by its solid 14.91% annual returns since inception, while IGDA offers the best option for global exposure.

Let's be blunt: Most halal ETFs are expensive, poorly diversified, and underperform the market. But there are a few worth considering, and more importantly, there's a better way to invest that we'll get to.

Key Takeaways

What Is a Halal ETF?

A halal ETF is a type of investment that lets you own a collection of Shariah-compliant stocks in a single purchase. These funds strictly follow Islamic financial principles, excluding companies involved in interest-based businesses (banks), alcohol, tobacco, gambling, adult entertainment, and other prohibited activities. They also screen out companies with excessive debt or interest income.

Like conventional ETFs, halal ETFs trade on stock exchanges and can be bought or sold throughout the trading day. They provide instant diversification across many companies while maintaining compliance with Islamic investing principles.

When you buy a single share of a halal ETF, you're essentially purchasing tiny pieces of each company held within the fund. These holdings are regularly reviewed (typically quarterly) to ensure ongoing Shariah compliance.

Looking to learn more about funds?

We discuss why you'd want to invest in a fund in a previous post; start there if you need more convincing!

Here's a complete list of halal ETFs available today:

ETFTitleGeographyAssetEx
ISDUiShares MSCI USA Islamic UCITS ETFUS 🇺🇸Equities🇬🇧
SPUSSP Funds S&P 500 Sharia Industry Exclusions ETFUS 🇺🇸Equities🇺🇸
HLALWahed FTSE USA Shariah ETFUS 🇺🇸Equities🇺🇸
SPRESP Funds S&P Global REIT Sharia ETFUS 🇺🇸Equities🇺🇸
ISDWiShares MSCI World Islamic UCITS ETFWorld 🌍Equities🇬🇧
IGDAInvesco Dow Jones Islamic Global Developed Markets UCITSWorld 🌍Equities🇬🇧
WSHRWealthsimple Shariah World Equity Index ETFWorld 🌍Equities🇨🇦
UMMAWahed Dow Jones Islamic World ETFWorld 🌍Equities🇺🇸
SPSKThe SP Funds Dow Jones Global Sukuk ETFWorld 🌍Sukuk🇺🇸
ISDEiShares MSCI EM Islamic UCITS ETFEmerging 🌍Equities🇬🇧

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Best Halal ETFs in 2025 (Ranked)

We've analyzed all available halal ETFs based on expense ratios, performance, diversification, and accessibility. Here's how they stack up in 2025:

Last updated: June 12, 2025

TickerRegionExpense Ratio5-yr CAGRTop-10 WeightAUM
SPUSUS 🇺🇸0.49%15.18%57.02%$1.3B
HLALUS 🇺🇸0.50%13.71%53.57%$608M
IGDAWorld 🌍0.40%7.29%38.12%$923M
WSHRWorld 🌍0.50%6.27%8.95%$365M
SPSKWorld (Sukuk) 🌍0.79%-1.94%18.04%$314M
ISDUUS 🇺🇸0.30%11.47%43.95%$247M
ISDWWorld 🌍0.30%9.85%33.15%$756M
UMMAWorld 🌍0.51%1.43%40.81%$135M
SPREUS (REIT) 🇺🇸0.59%-0.46%77.76%$156M
ISDEEmerging 🌍0.35%3%31.45%$307M

Color coding:

  • Green - Best in category (lower expense ratio, higher returns, lower concentration)
  • Yellow - Average performance
  • Red - Poor performance (higher fees, lower returns, higher concentration)

SPUS – Best for U.S. Exposure

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.49%
  • CAGR since inception: 14.91%
  • Top 10 concentration: 57.02%
  • Launch date: December 2019

SPUS is our top pick for U.S. market exposure. Launched in December 2019 — just as the ground underneath the markets was starting to collapse due to COVID-19 — this fund has actually outperformed the S&P 500 since inception. That's right, a halal ETF beating the market! It's delivered 14.91% average annual returns compared to 12.27% for the broader market.

SymbolNameWeight
MSFTMicrosoft Corp11.08%
NVDANVIDIA Corp11.02%
AAPLApple Inc9.54%
AMZNAmazon.com Inc6.45%
METAMeta Platforms Inc Class A4.79%
AVGOBroadcom Inc3.61%
GOOGLAlphabet Inc Class A3.24%
TSLATesla Inc2.72%
GOOGAlphabet Inc Class C2.65%
LLYEli Lilly and Co1.92%
Top 10 (Show All)57.02%
Last updated: 9 Jun, 2025

While its 0.49% expense ratio is ridiculously higher than conventional ETFs (which can be as low as 0.03%), SPUS at least justifies this highway robbery with consistent performance and solid Shariah compliance methodology. Its concentration in top holdings (57.02%) is quite high, but it's still among the better diversified halal options. Not exactly a high bar to clear, but hey — we'll take what we can get!

HLAL – Runner-up U.S.

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.50%
  • CAGR since inception: 13.36%
  • Top 10 concentration: 53.57%
  • Launch date: July 2019

HLAL comes in as our runner-up for U.S. market exposure. Launched by Wahed Invest in mid-2019, this ETF has also delivered strong returns, with a CAGR of 13.36% versus the S&P 500's 12.54% over the same period. Once again, we have an outperformer — who said ethical investing had to underperform?

SymbolNameWeight
MSFTMicrosoft Corp15.43%
AAPLApple Inc12.99%
METAMeta Platforms Inc Class A6.58%
GOOGLAlphabet Inc Class A4.53%
GOOGAlphabet Inc Class C3.77%
TSLATesla Inc3.70%
XOMExxon Mobil Corp2.03%
PGProcter & Gamble Co1.68%
JNJJohnson & Johnson1.64%
KOCoca-Cola Co1.22%
Top 10 (Show All)53.57%
Last updated: 9 Jun, 2025

With an expense ratio nearly identical to SPUS at 0.50% (still highway robbery compared to conventional ETFs), HLAL offers a very similar investment profile. Its top 10 holdings concentration is slightly lower at 53.57% — better than SPUS but still quite concentrated compared to conventional ETFs. The top holdings are strikingly similar to SPUS, with big tech absolutely dominating the portfolio.

IGDA – Best Global Diversification

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.40%
  • CAGR since inception: 7.29%
  • Top 10 concentration: 38.12%
  • Launch date: January 2022

For investors seeking global exposure, IGDA is our top recommendation. Launched in 2022 by Invesco, this ETF tracks the Dow Jones Islamic Market Developed Markets Index, providing diversification across developed markets worldwide.

SymbolNameWeight
MSFTMicrosoft Corp7.41%
NVDANVIDIA Corp7.35%
AAPLApple Inc6.37%
AMZNAmazon.com Inc4.31%
METAMeta Platforms Inc Class A3.20%
AVGOBroadcom Inc2.41%
GOOGLAlphabet Inc Class A2.16%
TSLATesla Inc1.82%
GOOGAlphabet Inc Class C1.77%
VVisa Inc Class A1.33%
Top 10 (Show All)38.12%
Last updated: 9 Jun, 2025

What sets IGDA apart is its competitive expense ratio of 0.40% – among the better options for halal ETFs (though still ludicrously expensive compared to conventional global ETFs at 0.05-0.10%). Surprisingly, it has actually slightly outperformed the S&P 500 since inception, which is rare for global funds. With top 10 holdings at 38.12%, it's well diversified for a halal fund and actually quite reasonable compared to conventional global ETFs.

WSHR – Canada-Friendly Pick

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.50%
  • CAGR since inception: 6.27%
  • Top 10 concentration: 8.95%
  • Launch date: May 2021

For Canadian investors, WSHR offers a convenient, locally-listed option that provides global diversification. Listed on the NEO exchange, this Wealthsimple ETF targets Shariah-compliant companies in developed markets.

SymbolNameWeight
KOCoca-Cola Co0.96%
TRI.TOThomson Reuters Corp0.92%
WES.AXWesfarmers Ltd0.91%
ULVR.LUnilever PLC0.90%
NESN.SWNestle SA0.89%
RSGRepublic Services Inc0.89%
NOVN.SWNovartis AG Registered Shares0.88%
REL.LRELX PLC0.88%
CPG.LCompass Group PLC0.87%
GIB.A.TOCGI Inc Class A0.86%
Top 10 (Show All)8.95%
Last updated: 9 Jun, 2025

The standout feature of WSHR is its relatively low concentration in top holdings – at just 8.95%, it's the most diversified halal equity ETF in our rankings (finally, one that actually deserves to be called diversified!). While its performance (6.27% CAGR) lags the S&P 500, it provides Canadian investors with a straightforward way to access global halal investments without currency conversion complications. It underperforms the S&P500 but it's more diversified. Maybe worth considering if you have no other options, but I wouldn't phone home about it.

SPSK – Only Sukuk ETF

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.79%
  • CAGR since inception: -1.88%
  • Top 10 concentration: 18.04%
  • Launch date: December 2019

SPSK stands as the only US-listed ETF providing access to the global Sukuk (Islamic bonds) market. For investors seeking fixed-income exposure in a Shariah-compliant wrapper, it's the sole option available.

SymbolNameWeight
KSA 3.628 04.20.27 REGSKSA Sukuk Limited 3.63%3.00%
KSA 4.274 05.22.29 REGSKSA Sukuk Limited 4.27%2.06%
KSA 4.511 05.22.33 REGSKSA Sukuk Limited 4.51%2.00%
SA Global Sukuk Ltd. 2.69%1.81%
KSA 5.268 10.25.28 REGSKSA Sukuk Limited 5.27%1.76%
KSA 5.25 06.04.34 REGSKSA Sukuk Limited 5.25%1.56%
PIFKSA 6 10.25.28SUCI Second Investment Co. 6%1.55%
KSA 2.969 10.29.29 REGSKSA Sukuk Limited 2.97%1.54%
INDOIS 4.15 03.29.27 RegSPerusahaan Penerbit Surat Berharga Syariah Indonesia III 4.15%1.38%
ISDB 4.906 10.03.28 EMTNIsDB Trust Services No. 2 SARL 4.91%1.38%
Top 10 (Show All)18.04%
Last updated: 9 Jun, 2025

However, performance has been utterly disappointing. Despite Sukuk typically being considered lower-risk investments, SPSK has actually lost money since inception, with a negative CAGR of -1.88%. Somehow, this embarrassment of a fund has managed to lose money despite the "predictable" returns Sukuk promise.

As expected, you can see that SPSK is much less volatile than SPY -- the only problem with that of course is that it's dropping in a less volatile manner. While it offers excellent diversification (top 10 holdings at just 18.04%), its high expense ratio of 0.79% further erodes returns. I feel sorry for anyone who puts money here; you're practically lighting it on fire. It's only recommended for investors specifically seeking Sukuk exposure who have no viable alternatives and enjoy watching their money slowly vanish.

The "Legacy" Halal ETFs (Approach with Caution)

The following ETFs were among the first Shariah-compliant funds available to investors. While they deserve credit for pioneering the space, their performance and characteristics make them difficult to recommend in 2025.

ISDU / ISUS 🇺🇸 – The 'OG' Halal ETF

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.30%
  • CAGR since inception: 6.22%
  • Top 10 concentration: 43.95%
  • Launch date: December 2007

This is the 'OG' Halal ETF — launched all the way back in 2007. There are two flavors of this ETF, the ISDU flavor (in USD) and the ISUS (in GBP). Otherwise, they're identical.

ISDU is also part of iShares's collection of halal indices that includes ISDW (targeting the developed World) and ISDE (targeting Emerging markets). That's ISDU for US, ISDW for World and ISDE for Emerging. Smart naming convention! Unfortunately, it's all downhill from there.

Feast your eyes on this chart showing how ISDU has fared against the S&P500 (which it's supposed to be based on) over the past 15 years:

A 188.31% return may sound decent, but remember that this is over 15 years! The yearly return (or CAGR) is just 6.22% — compared to the S&P500's 8.34% over the exact same time period. Talk about underwhelming.

SymbolNameWeight
MSFTMicrosoft Corp15.45%
TSLATesla Inc7.68%
XOMExxon Mobil Corp3.90%
PGProcter & Gamble Co3.28%
JNJJohnson & Johnson3.22%
CSCOCisco Systems Inc2.26%
CRMSalesforce Inc2.25%
CVXChevron Corp2.01%
ABTAbbott Laboratories1.99%
LINLinde PLC1.92%
Top 10 (Show All)43.95%
Last updated: 9 Jun, 2025

Also, the Top 10 holdings in this ETF represent a whopping 43.95% (!) of the fund — which is considered stupendously concentrated1. The fact that it's domiciled in Ireland does make things better for foreign investors from a tax perspective, but that's little consolation for years of chronic under-performance.

🧐 A quick note on MSFT - the top holding in this, and many other funds. It's considered non-compliant by many Shariah screeners due to its revenue from gaming & advertising exceeding the acceptable threshold. Why the funds haven't updated their holdings to reflect this is beyond me.

ISDW / ISWD 🌍 – World Exposure (If You Hate Returns)

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.30%
  • CAGR since inception: 3.99%
  • Top 10 concentration: 33.15%
  • Launch date: December 2007

Now, it's time to look at ISDW. This is the 3rd of the ISD's and it targets the 'Developed world' — kind of like an ISDU, but across the globe.

Ouch! Just a 98.64% return over the full 15 years of its measly existence, vs 1,268.67% (!) for the S&P500 — which makes you wonder why on Earth anyone would consider investing in the ISD series of funds. You get poor performance and low liquidity: 2 reasons NOT to!

SymbolNameWeight
MSFTMicrosoft Corp15.30%
TSLATesla Inc4.68%
XOMExxon Mobil Corp2.38%
PGProcter & Gamble Co2.00%
JNJJohnson & Johnson1.96%
ASML.ASASML Holding NV1.60%
CSCOCisco Systems Inc1.38%
CRMSalesforce Inc1.37%
NOVO B.CONovo Nordisk AS Class B1.26%
CVXChevron Corp1.22%
Top 10 (Show All)33.15%
Last updated: 9 Jun, 2025

Not much to say — at 33.15%, it's actually quite well diversified for a halal fund. With the recent fee reduction to 0.30%, it's become much more cost-competitive, but the performance remains disappointing — stay far, far away!

ISDE 🏭 – The Money-Losing Machine

📖 Prospectus page

Key Facts:

  • Expense Ratio: 0.35%
  • CAGR since inception: -1.65%
  • Top 10 concentration: 31.45%
  • Launch date: December 2007

This fund was born along with its brothers, ISDU and ISDW, on 7 Dec, 2007. It focuses on 'Emerging Markets', the politically correct term for countries that are 'less developed'. This principally includes all of the countries that aren't US/Europe — that's mainly China, India, Brazil and the Middle East.

The largest companies in these regions tend to be commodity-based, so they rely on extracting and processing natural resources. This means they're more exposed to fluctuations in the price of whatever the underlying commodities are (e.g. gold, aluminum, copper, etc).

Brace yourselves as we observe the performance of this abomination since inception:

This is definitely the black sheep of the family — in the 15 years of its existence, it's actually lost money -- to the tune of -1.65%/year! 🫢

For reference, the market gained 8.47%/year during that same period!

What sane person would put any money in this ETF? Even with the recent fee reduction to 0.35%, the performance is still abysmal!

SymbolNameWeight
005930.KSSamsung Electronics Co Ltd9.02%
1810.HKXiaomi Corp Class B5.10%
RELIANCE.NSReliance Industries Ltd4.45%
000660.KSSK Hynix Inc3.98%
1120.SRAl Rajhi Bank2.11%
2222.SRSaudi Arabian Oil Co1.73%
VALE3.SAVale SA1.50%
005935.KQSamsung Electronics Co Ltd Participating Preferred1.29%
KFH.KWKuwait Finance House1.16%
2308.TWDelta Electronics Inc1.10%
Top 10 (Show All)31.45%
Last updated: 9 Jun, 2025

The Top 10 holdings represent 31.45% of the index … which is actually quite well diversified for a halal fund! Too bad the diversification doesn't help with the terrible performance. I really am starting to wonder why iShares even bothers anymore.

What an abomination of an ETF! 🤮

UMMA 🌍 – The Underperformer

Key Facts:

  • Expense Ratio: 0.51%
  • CAGR since inception: 1.43%
  • Top 10 concentration: 40.81%
  • Launch date: January 2022

This ETF was also started by Wahed, the same company behind HLAL. Launched on January 6, 2022 this fund aims to provide halal exposure to global stocks — similar to ISDW.

Here's how it's performed since inception:

(Note: We've added ISDW on the chart to compare performance since they share similar goals)

Wow.

Somehow, it's managed to perform substantially worse than both the SPY and ISDW, and by quite a margin. The yearly return for UMMA is 1.43% vs 7.77% for SPY over the same time period.

SymbolNameWeight
TSMTaiwan Semiconductor Manufacturing Co Ltd ADR11.87%
IFX.DEInfineon Technologies AG4.28%
SAP.DESAP SE3.81%
ASML.ASASML Holding NV3.80%
NESN.SWNestle SA3.38%
NOVO B.CONovo Nordisk AS Class B2.88%
NOVN.SWNovartis AG Registered Shares2.85%
ROG.SWRoche Holding AG2.81%
AZN.LAstraZeneca PLC2.66%
005930.KSSamsung Electronics Co Ltd2.47%
Top 10 (Show All)40.81%
Last updated: 9 Jun, 2025

The Top 10 is also above the average concentration for the SPY, coming in at 40.81%. All that concentration and still can't perform — not exactly a winning combination.

SPRE 🇺🇸 – The Real Estate Disaster

Key Facts:

  • Expense Ratio: 0.59%
  • CAGR since inception: -0.46%
  • Top 10 concentration: 77.76%
  • Launch date: December 2020

This ETF was started by Shariah Portfolio, the same company behind SPUS. Launched on December 29, 2020 this fund aims to provide halal exposure to the Real Estate sector. Here's how it's performed since inception:

Ouch! It's underperformed the S&P500 by a mile since it started — with a -0.46% yearly return to the market's 11.46% over this period.

It'll shock you to know that the Top 10 holdings in this bad boy represent a whopping 77.76% (!). With such a high concentration, you'd need a legitimate reason to invest in the fund (and pay up the 0.59% expense ratio) instead of just buying the holdings yourself:

SymbolNameWeight
GMG.AXGoodman Group12.97%
EQIXEquinix Inc12.34%
PLDPrologis Inc12.30%
WELLWelltower Inc11.78%
WYWeyerhaeuser Co4.91%
AVBAvalonBay Communities Inc4.82%
EQREquity Residential4.76%
CPTCamden Property Trust4.76%
ELSEquity Lifestyle Properties Inc4.69%
MAAMid-America Apartment Communities Inc4.44%
Top 10 (Show All)77.76%
Last updated: 9 Jun, 2025

But why bother buying the holdings at all?

For that miserable performance, you're better off stashing your money under your mattress and losing it to inflation instead. You'll still lose money, just slower.

Halal ETF Performance vs S&P 500 (Charts)

How do halal ETFs actually perform compared to the broader market? Let's examine the performance of our top-ranked funds against the S&P 500 index.

U.S. Halal ETFs vs S&P 500

Both SPUS and HLAL have notably outperformed the S&P 500 since their launch in 2019. SPUS has shown 14.91% annual returns vs. 12.27% for the S&P 500, while HLAL has returned 13.36% annually. I know, I was shocked too! Halal funds actually beating the market? What sorcery is this?

This outperformance can be attributed primarily to:

  1. The exclusion of heavily-indebted companies (a Shariah requirement) — turns out avoiding debt-laden companies isn't such a bad investment strategy after all!
  2. Overweighting in technology stocks, which performed exceptionally well during this period — when Big Tech wins, these funds win big
  3. The absence of conventional banks, which faced challenges during recent market volatility — who knew avoiding interest-based businesses would actually help returns?

Global Halal ETFs vs S&P 500

Global halal ETFs show a mixed picture, with some surprising outperformers. IGDA has been the strongest performer in this category, with 7.29% annual returns since inception, compared to the S&P 500's 6.96% over the same period — actually beating the market!

This outperformance is quite remarkable for a global fund, especially considering the typical dominance of U.S. markets (particularly tech stocks) in recent years. IGDA's success shows that well-constructed global halal portfolios can compete with U.S.-focused investments, offering both diversification and competitive returns.

Legacy Halal ETFs vs S&P 500

The iShares suite of Islamic ETFs (ISDU, ISDW, and ISDE) have significantly underperformed the market over their longer history. Just look at that chart! It's like they're not even trying to keep up. Most concerning is ISDE (emerging markets), which has actually lost money over its 15+ year existence with a CAGR of -1.65%, compared to the S&P 500's 8.47% gains over the same period. If you had invested $10,000 in ISDE at launch, you'd now have... less than $10,000. Meanwhile, that same amount in an S&P 500 fund would have multiplied several times over. Ouch.

Country-Specific Access & Tax Notes

Accessing halal ETFs can be challenging depending on your location. Here's what investors need to know in different countries:

Canada

Canadian investors have multiple options for accessing halal ETFs:

  • Local option: WSHR is listed directly on the Canadian NEO exchange — finally, something made just for Canadians!
  • U.S. options: Most brokers (Wealthsimple, IBKR, Questrade) offer access to U.S.-listed ETFs like SPUS and HLAL
  • Tax considerations: 15% withholding tax on dividends from U.S. companies; consider using TFSA accounts to shield from capital gains

The TFSA advantage is substantial here — you can at least keep all your halal investment gains tax-free, which helps offset those hefty expense ratios somewhat.

UK

UK investors face more restrictions but still have viable pathways:

  • Local options: ISDU, ISDW, ISDE, and IGDA are all listed on the London Stock Exchange — though given their performance, that's hardly a blessing
  • U.S. options: Some UK brokers (Interactive Brokers, Trading 212) provide access to U.S.-listed ETFs
  • Currency impact: Be aware of currency conversion fees when purchasing USD-denominated securities — they'll eat into your returns almost as much as those expense ratios!
  • Tax advantages: Irish-domiciled funds like ISDU offer favorable withholding tax treatment (15% vs 30%)

UK investors get to experience the "joy" of both currency risk AND high expense ratios. Lucky you!

India / GCC

Investors in India and Gulf Cooperation Council countries typically face the most restrictions:

  • Limited direct access: Many local brokers don't offer international ETFs — it's like being locked out of a mediocre party
  • Workarounds: Consider international brokers like Interactive Brokers or regional specialists
  • Local alternatives: Some countries have local Shariah-compliant funds that may be easier to access
  • Tax complexity: Consult with local tax professionals regarding international investment taxation — because the only thing more fun than high fees is complicated taxes!

For investors in any region facing difficulty accessing these ETFs, alternative approaches may be more practical.

Are Halal ETFs Worth It? Fees, Concentration & Alternatives

Let's be brutally honest about the state of halal ETFs in 2025:

The Problems

  1. High Fees - You're still paying 10-15x more than conventional ETFs:

    • SPUS charges 0.49% ($490 annually per $100k invested)
    • Even the cheaper ISD funds charge 0.30-0.35% ($300-350 annually per $100k invested)
    • Compare this to just 0.03% for regular S&P 500 ETFs
  2. Dangerous Concentration - Most halal ETFs have 40-70% of their holdings in just 10 stocks:

    • That's 2-3x more concentrated than the S&P 500
    • You're not getting the diversification you're paying for
    • You're stuck with whatever stocks the ETF provider decides are "compliant"
  3. Limited Options - With just 10 halal ETFs globally (compared to 10,000+ conventional ETFs):

    • You have minimal choices for sector-specific investments
    • Geographic diversification options are restricted
    • No choices for different investment strategies or factors

Our Recommendation

For most investors, the best options are:

  • SPUS for U.S. exposure (14.91% CAGR since inception)
  • IGDA for global exposure (0.40% expense ratio, reasonable diversification)

But there's a better way:

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The Better Way Forward

We've developed a modern solution that addresses all these problems, offering:

  • Lower fees than any halal ETF
  • Better diversification
  • Full Shariah compliance
  • Complete control over what stocks you own
  • Superior returns potential

The math is simple: on a $100k portfolio, you're paying $300-790 per year (every year) in fees with these ETFs. That's money being taken directly from your returns, year after year.

Learn why halal ETFs are fundamentally flawed and discover the better alternative →

FAQ

Is the S&P 500 halal?

No, the S&P 500 index itself is not halal. It contains many companies that violate Islamic investment principles, including conventional banks (which deal with interest), alcohol producers, gambling companies, and businesses with excessive debt ratios. About as halal as a bacon sandwich, really. Halal ETFs like SPUS and HLAL apply Shariah screening filters to exclude non-compliant companies from the S&P 500, giving you a much smaller, significantly more concentrated, and considerably more expensive version of the index. Progress!

What's the difference between halal ETFs and mutual funds?

Halal ETFs trade on exchanges throughout the day like stocks, while Islamic mutual funds are priced once daily. ETFs typically have lower minimum investments and greater tax efficiency. In the U.S., there are very few Islamic mutual funds available to retail investors (count yourself lucky, maybe?), making ETFs the more accessible option for most Muslims. Both product types apply similar Shariah screening methodologies and charge similarly eye-watering fees.

How do ETFs screen for Shariah compliance?

Halal ETFs employ a two-step screening process:

  1. Business Activity Screening: Excludes companies deriving significant revenue from prohibited activities (interest, alcohol, gambling, pork, weapons, adult entertainment, etc.) — goodbye to about half the S&P 500 right there
  2. Financial Ratio Screening: Removes companies with:
    • Debt exceeding 33% of market capitalization — there goes another quarter
    • Interest-bearing securities exceeding 33% of assets
    • Accounts receivable exceeding 45% of total assets
    • Income from non-compliant activities exceeding 5% of revenue

Different funds may use slightly different thresholds, but these standards are broadly consistent across halal ETFs. By the time all these filters are applied, you're left with a much smaller universe dominated by tech companies and a few healthcare firms. Diversification? Who needs it!

Can I own S&P 500 ETFs as a Muslim?

Standard S&P 500 ETFs like SPY, VOO, or IVV are generally not considered Shariah-compliant because they include companies involved in prohibited activities and those with excessive financial leverage. Muslims seeking index-based investments should use specifically designed halal ETFs like SPUS or HLAL, which filter the S&P 500 for Shariah compliance. Yes, you'll pay 10-15x more in fees, but that's the price of compliance in today's market. At least until better alternatives come along...

Are halal ETFs less profitable than conventional ETFs?

Not necessarily. While halal ETFs have higher expense ratios (sometimes comically higher), their performance can sometimes outpace conventional counterparts. For example, SPUS and HLAL have outperformed the S&P 500 since their inception. Shariah screening tends to favor companies with lower debt and stronger balance sheets, which can be advantageous during economic downturns. However, they may underperform during periods when financial stocks rally significantly.

The real issue isn't performance — it's that you're paying premium prices for what should be basic investment products. Think of it like paying $15 for a bottle of water in the desert. Is it refreshing? Sure. Should it cost that much? Absolutely not.

References

Footnotes

  1. For reference, the S&P500's Top 10 (which many complain about being too concentrated) represent just ~25%

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