What is Shariah-compliant ETF?

A halal ETF is an exchange-traded fund (ETF) that holds only stocks (or sukuk) that pass a Shariah screen. By buying one ETF share you invest in dozens or hundreds of halal stocks at once.

How it works

The fund usually tracks an Islamic index. The index provider selects stocks according to halal screening rules, and the fund's Shariah board oversees the process. Holdings are reviewed periodically (for example quarterly): stocks that no longer pass are sold, newly qualifying ones are added.

Advantages

• Diversification — less exposure to any single company (diversification).
• No need to screen yourself — you don't have to check dozens of reports every quarter.
• Convenience — bought from a broker just like a regular stock.

Things to watch

• Expense ratio — halal ETFs are usually more expensive than broad-market index funds.
• Concentration — low-debt companies are often in tech, so the fund can be tilted towards one sector.
• Purification — some funds purify impermissible income themselves, in others it's up to the investor. Read the fund documents.
• Standard differences — the screening rules a fund follows may differ from AAOIFI.

For screening results on individual stocks: halal stocks.

For information only, not a fatwa.