Some of the best halal dividend ETFs have risen to popularity as an appealing investment choice for Muslim investors who are seeking to align their financial goals with their ethical convictions.
The best halal dividend ETFs came into being as a result of the growing need for investment options that are in accordance with Shariah norms.
These ETFs provide a unique blend of sustainable dividend schemes, guaranteeing that they are aligned with the fundamental tenets of Islamic financing.
This article provides a selection of the best Halal Dividend ETFs currently accessible on the market, each of which was carefully selected.
It provides an in-depth analysis of their qualities, performance, and potential to produce socially responsible profits.
This article is for individuals who either demonstrate a significant sense of responsibility in their investment activities or who have a broad interest in the field of Halal investing.
ETFs are innovative investments that target not just financial success but also moral rectitude, and we would be honored if you would join us in investigating these innovative ETFs.
If you have any questions or want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.
Wahed Dow Jones Islamic World ETF
The Wahed Dow Jones Islamic World ETF (UMMA), which was first offered in January 2022, is a kind of investment vehicle that focuses on Shariah-compliant stocks in both established and developing countries across the world, with the exception of the United States.
As a component of its overall investment strategy, UMMA takes environmental, social, and governance (ESG) factors into account while making financial decisions.
This dividend ETF, which is one of the best halal dividend ETFs, has assets from a considerable number of well-known technological companies, including Samsung Electronics, TSMC, and Tencent, amongst others.
The fund does not invest in stocks of firms that produce or distribute alcoholic beverages, cigarettes, firearms, meals including pork, conventional financial services, or adult entertainment. This decision was made to ensure that the fund remains compliant with the principles of Shariah.
The particular ETF has a substantial amount of daily trading volume and boasts a cost ratio of 0.65%. In addition to this, it is able to properly manage a huge portfolio of assets that is worth more than 22 million dollars.
However, since it was only just incorporated, there is a dearth of data accessible on its returns and general performance. This is owing to the fact that it was only recently incorporated. It is too early to make a judgment on the results that they have attained at this point.
Wahed FTSE USA Shariah ETF
Yasaar Ltd., an acknowledged independent consulting firm and a renowned authority in the subject of Shariah law, contributed to the creation of the FTSE Shariah USA Index as part of a joint effort.
An Islamic legal opinion is known as a fatwa, and Yasaar Ltd. provided one that recognized the index’s conformance with Shariah rules. Yasaar has extensive knowledge of the several schools of thought that may be found within the realm of Shariah.
Since its debut in 2019, the Wahed FTSE USA Shariah ETF, more often referred to by its ticker symbol HLAL, has established itself as the largest halal ETF based in the United States. It is one of the best halal dividend ETFs.
A passive allocation of money into an equity index that is run in accordance with the tenets of Islamic law is the investment technique that this specific fund employs as part of its overall investment strategy. As a consequence of this, it is one of the best halal dividend ETFs.
The expense ratio of 0.50% demonstrates that HLAL is a fund that complies with the Sharia rules and operates with a low-cost structure. In addition, HLAL had a better performance than the S&P500 in both the year 2020 and the year 2021.
HLAL has a portfolio that contains around 200 shares in companies based in the United States. However, the company does not invest in companies that are burdened by excessive debt, exploitative institutions or are involved in the manufacturing or sale of alcohol, weapons, adult content, pork, gambling, or cigarettes.
As of the end of the year 2021, the principal assets of the portfolio included well-known companies including Apple, Tesla, and Johnson & Johnson. The total worth of all of their assets is now estimated to be $164 million at this time.
SP Funds S&P 500 Sharia Industry Exclusions ETF
SP Funds is a financial investment manager that operates in accordance with the tenets of Shariah law.
When it comes to the management of their money, the organization ensures that they comply with the standards established by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
In addition, the group works closely with Imam Omar Suleiman, who acts as their ethical consultant and is a member of their advisory board.
The goal of the SP Funds S&P500 Sharia Industry Exclusions ETF (SPUS), which was launched in 2019 with the intention of investing in firms that are included in the S&P500 index, is to exclude certain industries from consideration. It is one of the best halal dividend ETFs.
In accordance with Islamic law, the best halal dividend ETFs does not accept investments from companies that do not meet the criteria outlined in the fund’s investment requirements.
Within the framework of SPUS, it is understood that enterprises related to the production of alcoholic beverages, gambling, guns, cigarettes, pornography, pork, and insurance are not permitted.
In addition, businesses with a debt ratio that is more than 33% are not eligible for investment, since this is one of the grounds for excluding enterprises.
The percentage of SPUS’s expenditures comes in at 0.49%. The fund has around 200 holdings as of the end of December 2021. Apple, Microsoft, and Google were all major players in their own sectors when it came to the technology stock market.
It is important to point out that the SPUS index had a better performance than the S&P500 index over the years 2020 and 2021. This is something that should be mentioned.
Final Thoughts
The principles that govern Islamic investing are admirable, particularly for novice or inexperienced investors.
Investors may lower the risk of making investments in firms that are tied to sectors that may be influenced by such laws if they follow this advice and minimize the risk of making investments in companies that may be subject to future government regulation by following these guidelines.
It is recommended to choose an ETF that effectively diversifies a person’s portfolio and to use a screening procedure that eliminates firms that have significant levels of debt. Both of these are examples of sound investing practices.
This method aims to lower risk while simultaneously improving the quality of the investment as a whole.
ETFs, need very little maintenance, and those who invest even a little sum of money on a regular basis have a chance of amassing significant wealth over time.
As is the case with any investment, it is prudent to schedule sufficient time to keep oneself apprised of current events that may have an impact on one’s financial holdings and produce significant fluctuations in market conditions.
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