Best Halal ETFs To Invest In
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That includes if you are interested in halal ETFs and shariah-compliant fixed-return options.
Introduction
In this article, we will cover the best halal ETFs to invest in.
Exchange-Traded Funds (ETFs) offer simple access to a specified market sector. Buying ETFs is frequently simpler and quicker for today’s time-pressed investors than analyzing each firm in a certain target category.
Additionally, investors may diversify into a basket of hundreds of equities with just one ETF at a considerably cheaper cost than they would by purchasing index funds.
ETFs might be seen as lower-risk investments than individual stocks even though they provide equal trading freedom to equities. This is because ETFs often include a larger number of component assets, which tends to make them less volatile.
Let’s take a close look at the many ETFs that cater to investors who are halal-conscious in light of the many advantages of investing in ETFs.
Here are the best halal ETFs to invest in.
Are All ETFs Halal?
This is determined by the composition of the fund. The simplest approach to determine this is to seek ETFs that have been recognized as Sharia-compliant by Muslim authorities. Otherwise, you’d have to make a manual check.
When doing a manual review, you must first ensure that the ETF genuinely owns the underlying assets. ETFs that use derivative instruments to simulate the same impact is not permitted to be invested in.
The next step is to identify if every business or piece of property in a fund adheres to halal standards. If that is the case, then the entire ETF is halal.
The ETF is still permissible to invest in provided it has fewer than 5% of non-compliant firms or assets, but you need donate that portion of your gains to charity in order to make sure they are pure.
Manually screening a stocks and shares ETF is actually fairly challenging for the investor. This is so because most ETFs contain anywhere from 30 to hundreds of distinct active holdings.
Sticking to the approved halal ETFs may be the best course of action for this reason. For the time being, at least, until a screening procedure is more quickly automated.
What Is A Halal ETF?
Halal ETFs function similarly to regular ETFs. Halal exchange-traded funds (ETFs) follow an underlying asset through a portfolio of assets. Halal ETFs are different since they abide with Islamic laws.
They often follow an Islamic benchmark index, which is made up of businesses that shouldn’t engage in any activities that Islam forbids, such as gambling (maisir), ambiguity (gharar), and interest-based lending (riba).
Finally, a committee that has been created to handle halal ETFs constantly examines the ETF to verify that it strictly adheres to Islamic standards.
How To Invest In Halal ETFs?
Every religious and legal concept, as well as the procedures for establishing standards and guidelines for how to interpret Islamic doctrine, are included in the Sharia.
Rules that apply to investing in international financial markets can be deduced from religious practice.
Indexes are likewise subject to these guidelines. Western financial institutions are typically omitted from such rankings since interest revenue from loans is regarded as being inconsistent with Sharia law.
Additionally, businesses must have a certain level of stability, and as a result, cannot exceed set limitations for leverage or debt.
Furthermore, there are a number of exclusion standards for non-Sharia-compliant markets and sectors that are quite comparable to standards for sustainable indexes.
As a result, the healthcare and technology industries are heavily represented in Sharia-compliant indexes. A well-known advisory council of Sharia specialists keeps an eye on the index rules.
You may access ETFs that provide access to investments that comply with Sharia in this investing guide.
11 Best Halal ETFs To Invest In
1. Wahed FTSE USA Shariah ETF (HLAL)
One of the best halal ETFs to invest in is Wahed FTSE USA Shariah ETF since it has a low expense ratio of 0.50%.
In collaboration with FTSE Russell and the US Banks Lifted Funds Trust, Wahed Invest introduced the Wahed FTSE USA Shariah ETF. It was launched in October 2019.
This NASDAQ-listed ETF monitors the performance of the FTSE Shariah USA Index’s total return and trades under the ticker symbol HLAL.
The ETF consists of 224 equities from big and mid-cap US corporations that pass the financial ratio screening requirements and the business activity of Shariah.
Although the majority of these stocks are from different industries, the technology sector makes up 37.4% of the total.
As of March 2022, the top ten holdings are: Apple Inc, Tesla Inc, Johnson & Johnson, Procter & Gamble Co., Exxon Mobil Corp., Chevron Corp., Pfizer Inc., Lilly(Eli) & Co, Cisco Systems, Inc., and Thermo Fisher Scientific Inc.
With a dividend yield of 0.8% in 2021, Wahed FTSE USA Shariah ETF delivered an annual total return of 28.59%.
The index is updated twice a year, in March and September, and is calculated in real-time and at closing.
Additionally, Yasaar Ltd. conducts a quarterly audit of the ETF’s shariah compliance in the months of March, June, September, and December.
2. Wahed Dow Jones Islamic World ETF (UMMA)
As the first ESG-aware ETF with a low-cost ratio, Wahed Dow Jones Islamic World ETF is included on the list of best halal ETFs to invest in.
In January 2022, Wahed Invest, Dow Jones, and US Bank’s Listed Funds Trust collaborated to launch this specific ETF.
The Dow Jones Islamic Market International Titans 100 Index is tracked by the ETF, which is traded on NASDAQ under the symbol UMMA.
This USD-based ETF invests in equities securities from numerous emerging and established markets, with the exception of those with US domiciles.
The cost ratio is minimal at 0.65% despite being an actively managed ETF.
Investors looking for a varied investment portfolio with globally active shares that are also socially, environmentally, and politically responsible have new options thanks to the Wahed Dow Jones Islamic World ETF.
The ETF provided 102 components as of 2021, representing 21 nations and a variety of sectors.
The top ten holdings of Wahed Dow Jones Islamic World ETF are: Taiwan Semiconductors Manufacturing Co., Samsung Electronics Co., ASML Holding NV, Rogers Corp., Roche Holding Ltd, Tencent Holdings Ltd, Nestle SA Reg, Novartis AG, Novo Nordisk A/S Class B, JD.com Inc
A sizeable portion of the ETF—27.1%—is made up of the information technology industries.
Japan is the country that contributes the most holdings.
The following countries also have holdings: Australia, Britain, Canada, Brazil, China, Denmark, France, Germany, Finland, Hong Kong, Ireland, Netherlands, Russia, Italy, South Korea, Spain, Switzerland, Taiwan, and Sweden.
3. SP Funds Dow Jones Global Sukuk ETF (SPSK)
One of the best halal ETFs to invest in is SP Funds Dow Jones Global Sukuk, which provides lower length and interest rate risk while allowing you to invest in Sukuk.
The Dow Jones Sukuk Total Return Index is tracked by this stock, which is traded on NYSE Arca under the symbol SPSK. The SPSK is a USD-denominated portfolio of investment-grade Sukuk for several nations.
5.93 years is the weighted average maturity.
It consists of holdings like KSA Sukuk Limited, KSA Sukuk Limited, SA Global Sukuk Limited, KSA Sukuk Limited, Perusahaan Penerbit SBSN Indonesia III, Perusahaan Penerbit SBSN Indonesia III, Perusahaan Penerbit SBSN Indonesia III, KSA Sukuk Limited, IsDB Trust Services No. 2 SARL, and SA Global Sukuk Limited.
The SP Funds Dow Jones Global Sukuk ETF has an expense ratio of 0.65% and pays monthly dividends of $0.03.
4. Wealthsimple Shariah World Equity Index ETF (WSHR)
The first Canadian ETF that complies with shariah law to be released by Wealthsimple in October 2020 is the Wealthsimple Shariah World Equity Index.
The Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index is replicated by this index, which is quoted on NEO Exchange under the symbol WSHR.
Rating Intelligence Partners, the well-known Islamic advice company, conducts a biannual review of the trustee, Mackenzie Investments, for conformity with Shariah.
The cost ratio and very low risk of Wealthsimple Shariah World Equity Index ETF make it one of the best halal ETFs to invest in.
This ETF, which trades in Canadian dollars and has an expense ratio of 0.50%, is passively managed, focuses on stocks from sharia-compliant firms, and satisfies the ESG standards.
The consumer staples sector, which accounts for 13.9% of this ETF, is its main component.
The top ten holdings of this ETF are Nestle SA, Hong Kong and China Gas Co Ltd, CLP Holdings Ltd., Waste Connections Inc., Givaudan SA, Beiersdorf AG, McDonald’s Holdings Co Japan Ltd., Singapore Telecommunications Ltd., SGSSA, and Walters Kluwer NV.
This ETF provides minimal risk since it invests in high-quality equities with less volatility. Distributions from the ETF are made quarterly in March, June, September, and December, with a dividend yield of 0.34%.
5. SP Funds S&P500 Shariah Industry Exclusions ETF (SPUS)
One of the best halal ETFs to invest in is the SP Funds S&P500 Shariah Industry Exclusions ETF since it complies with shariah requirements while providing exposure to the S&P500 index.
It debuted in 2019 under the ticker SPUS on the NYSE Arca. The S&P500 Shariah Industry Exclusions Index is tracked by this ETF. Together with S&P Dow Jones Indices LLC, SP Funds created the index.
Data processing, outsourced services, financial exchanges, and aerospace and defense are among the constituents that SPUS excludes using an industry exclusion mechanism.
This ETF’s top ten holdings are as follows: Apple Inc, Microsoft Corporation, Alphabet Inc – Ordinary Shares – Class A, Alphabet Inc – Ordinary Shares – Class C, Tesla Inc, NVIDIA Corp, Meta Platforms Inc – Ordinary Shares – Class A, Johnson & Johnson, Procter & Gamble Co., and Home Depot, Inc.
The SP Funds S&P 500 Shariah Industry Exclusions ETF’s major sector is the technology industry, which makes up 40.79% of the ETF.
Additionally, it pays a monthly dividend of $0.03 and has a 0.49% expense ratio.
6. iShares MSCI Emerging Markets Islamic UCITS ETF (ISDE)
The iShares MSCI Developing Markets Islamic UCITS ETF was included on the list of best halal ETFs to invest in because it provides exposure to emerging markets through direct investment in several international emerging markets firms.
The ETF trades under the ticker symbol “ISDE.”
ISDE ETF is very similar to ISWD ETF in many ways. Both are based in Ireland and are USD-denominated exchange-traded funds. Both were also launched in 2007 and also have the same fund manager.
The ETF tracks stocks from the London Stock Exchange and Berne Stock Exchange-listed MSCI EM Islamic Index.
The ETF held 324 holdings as of 2022, with 32.02% of its holdings in the technology sectors.
The stocks of the iShares MSCI Emerging Markets Islamic UCITS ETF come from numerous international businesses, including Taiwan Semiconductor Manufacturing, Samsung Electronics Ltd, Reliance Industries Ltd, CIA Vale Do Rio Doce SH, SK Hynix Inc, Al Rajhi Bank, Samsung Electronics Non-Voting Pre, Saudi Basic Industries, Saudi Arabian Oil, and Samsung SDI Ltd.
ISDE has a 1.90% distribution yield and a 0.85% expense ratio.
7. iShares MSCI World Islamic UCITS ETF (ISWD)
One of the best halal ETFs to invest in is the iShares MSCI Globe Islamic UCITS ETF because it provides diversity through direct investment in stocks of developed firms all over the world.
iShares, an Irish company, debuted this US dollar-denominated ETF on the Swiss Stock Exchange and London Stock Exchange in December 2007.
The ticker symbol for this ETF is ISWD. The ISWD fund is managed by Black Rock Asset Management Ireland Ltd. MSCI World Islamic Net Total Return Index-USD is tracked by ISWD.
The iShares MSCI World Islamic UCITS ETF holds shares in several international businesses, including Johnson & Johnson, Procter & Gamble Co, Exxon Mobil Corp, Chevron Corp, Pfizer Inc, Roche Holding AG, Cisco Systems Inc, Thermo Fisher Scientific Inc, Shell PLC, and Abbott Laboratories.
The Healthcare sector makes up the majority of the 350 holdings, accounting for 25.66% of the total. ISWD has a 1.56% distribution yield of 1.56% and a 0.60% expense ratio.
8. Saturna Al-Kawthar Global Focused Equity UCITS ETF (AMAP.L)
The Saturna Al Kawthar Worldwide Focused Equity UCITS ETF, which holds a selection of premium stocks from diverse global ESG companies, is one of the best halal ETFs to invest in.
This ETF, which debuted in September 2020, is traded on the London Stock Exchange under the ticker AMAP/ AMAL.
Saturna Capital Corporation actively manages it, and it does not follow any particular Index. There are 40 holdings in the Saturna Al Kawthar Global Focused Equity UCITS ETF.
The Saturna Al Kawthar Global Focused Equity UCITS ETF holds shares in several international businesses, including Edwards Lifesciences Ord, Cisco-T Ord, Accenture Plc-A Ord, Schneider Electric Se, Apple Ord, Nintendo Ord, Novozymes Ord, Tokyo Electron Ord, Roche Ord, and Aveva Group Ord.
The ETF’s cost ratio is 0.75%.
9. SP Funds S&P Global REIT Shariah ETF (SPRE)
As a low-cost investment choice that can expose you to Shariah-compliant real estate-related assets, this ETF is one of the best halal ETFs to invest in.
The SP Funds S&P Global REIT Shariah ETF is a REIT ETF, which combines the features of real estate and trust funds.
The S&P Global All Equity REIT Shariah Capped Index is tracked by this ETF, which SP Funds debuted in 2020 on the NYSE Arca with the symbol SPRE.
There are 44 holdings in the SP Funds S&P Global REIT Shariah ETF as of 2022, with the following 10 being among the top holdings: Prologis Inc, American Tower Corp., Crown Castle International Corp, Equinix Inc, Public Storage, Equity Residential Properties Trust, Avalonbay Communities Inc., Weyerhaeuser Co., Mid-America Apartment Communities, Inc., and SEGRO Plc.
The ETF, which solely invests in real estate, produces consistent rental income earnings. This ETF delivers a $0.07 monthly dividend payment and has a 69% expense ratio.
10. iShares MSCI USA Islamic UCITS ETF (ISUS)
This list of best halal ETFs to invest in includes the iShares MSCI USA Islamic UCITS ETF because it can give you exposure to a variety of US-based businesses.
This iShares ETF is based in Ireland, denominated in USD, and managed by BlackRock Asset Management Ireland Ltd., much like the two iShares ETFs mentioned above.
The ETF tracks the MSCI USA Islamic Net Total Return Index and is traded on the London Stock Exchange under the ticker name ISUS.
The healthcare industry accounts for 30.26% of the 115 equity holdings in total.
The following are the top 10 holdings of the iShares MSCI USA Islamic UCITS ETF: Johnson & Johnson, Procter & Gamble, Exxon Mobil Corp, Chevron Corp, Pfizer Inc., Cisco Systems Inc., Thermo Fisher Scientific Inc., Salesforce.com Inc., Abbot Laboratories, and Merck & Co. Inc.
The distribution yield of the ISUS ETF is 1.09%, and its expense ratio is 0.50%.
11. Invesco Dow Jones Islamic Global Developed Markets UCITS ETF (IGDA)
The Invesco Dow Jones Islamic Global Developed Markets UCITS ETF, with an exceptional cost ratio of 0.40%, is one of the best halal ETFs to invest in.
This US dollar-denominated ETF tracks the Dow Jones Islamic Market Developed Markets Index’s performance. Invesco Capital Management LLC also oversees the management of this equity-based vehicle.
The major sector, which accounts for 32.79%, is technology.
Among the many holdings of IDGA are Apple Inc., Microsoft Corp., Amazon.com, Tesla Inc., Alphabet Inc-CL A, Alphabet Inc-CL C, Nvidia Corp., Meta Platforms Inc., Johnson & Johnson, and Procter & Gamble Co.
The Invesco Dow Jones Islamic Global Developed Markets UCITS ETF tries to replicate the performance of equities in developed global markets.
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