For Muslim investors, one question comes up again and again: how can I invest in the stock market in a way that's consistent with my faith? Investing is not only permitted but encouraged in Islam, provided it follows certain principles, yet conventional funds often fall short. A standard S&P 500 fund, for example, doesn't pass Sharia screening, because a meaningful slice of the index is conventional (interest-based) financial companies, among other issues.
The good news is that halal investing has never been more accessible. This guide explains what Sharia-compliant investing actually means, how a stock or fund is screened, and how a new generation of halal ETFs, led by two of the largest, HLAL and SPUS, now lets observant Muslims tap into US markets while staying true to their principles. It's an educational explainer, not investment advice, and not a substitute for guidance from your own qualified scholar or advisor. If it leaves you wanting to research funds like these, you can explore HLAL and SPUS US ETFs from just $1 with zero commission on the Nemo.money app.
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What Is Halal (Sharia-Compliant) Investing?
Halal investing means growing your wealth in line with Islamic principles. The core idea is that money should be put to work in real, productive, ethical enterprise, while avoiding a few things Islam prohibits:
- 🚫 No riba (interest). Earning or paying interest is not permitted, which is why conventional banks, lenders and bonds are generally excluded.
- 🚫 No haram industries. Businesses whose core activity is impermissible, alcohol, tobacco, gambling, weapons, pork, and adult content, are off-limits.
- ⚖️ No excessive uncertainty or speculation (gharar/maysir). Highly speculative, gambling-like activity is discouraged, which is one reason many scholars caution against things like conventional derivatives trading.
- 🤝 Ethical, asset-backed enterprise. Investment should support genuine economic activity and share in real profit and loss.
Crucially, investing itself is widely regarded as encouraged in Islam, owning shares means owning a piece of a real business, which fits Islamic principles well. The task is simply to make sure the specific businesses (and the way you invest in them) pass Sharia screening. That screening is exactly what halal funds are built to do at scale.
What Is a Halal (Sharia-Compliant) ETF?
A halal ETF is a fund built to follow the principles of Islamic finance. In practice, that means two layers of screening:
- 🚫 Sector exclusions. The fund avoids companies whose main business involves activities considered impermissible (haram), such as alcohol, tobacco, gambling, weapons, pork products, adult content, and conventional (interest-based) financial services.
- 📊 Financial-ratio screens. Even otherwise-acceptable companies must pass tests on things like debt levels and interest-based income (for example, interest-bearing debt below roughly 30% of market value, and impermissible income below a small threshold), because earning or paying significant interest (riba) is prohibited.
- 🧾 Income "purification". Because a tiny amount of income may still come from non-compliant sources, these funds typically calculate a "purification" figure so investors can give that small portion to charity, a distinctive feature of Islamic investing.
The result is a portfolio designed to let observant Muslims participate in the stock market's long-term growth while staying within their principles, screened and reviewed by Sharia scholars.
Meet the Two Funds: HLAL and SPUS
HLAL and SPUS are the two largest US-listed halal equity ETFs. They share the same goal, Sharia-compliant US stock exposure, but take slightly different routes.
SPUS, the SP Funds S&P 500 Sharia Industry Exclusions ETF:
- 🇺🇸 What it tracks: a Sharia-screened version of the S&P 500. It starts with the 500 largest US companies and removes those that fail the screen (plus a few excluded sub-industries), leaving roughly 200+ large-cap holdings.
- 💰 Expense ratio: around 0.45% a year.
- 🏛️ Details: launched in December 2019, listed on the NYSE, one of the largest halal ETFs by assets. Its Sharia compliance is certified by an independent advisory firm and reviewed regularly.
HLAL, the Wahed FTSE USA Shariah ETF:
- 🇺🇸 What it tracks: the FTSE USA Shariah Index, a broader universe that includes both large and mid-cap US companies passing the screen, giving slightly wider market coverage (also around 200+ holdings).
- 💰 Expense ratio: around 0.50% a year.
- 🏛️ Details: launched in 2019, listed on the Nasdaq, run by Wahed (a fintech focused on Islamic investing). Its compliance is certified by Wahed's Sharia board and reviewed periodically.
HLAL vs SPUS: How Do They Compare?
They're more alike than different, but the nuances matter:
- 🎯 Starting universe. SPUS starts from the S&P 500 (large-cap only). HLAL starts from a broader FTSE index that also includes mid-caps, so it offers marginally wider exposure.
- 🏦 Screening body. SPUS uses an independent Sharia advisory firm; HLAL uses Wahed's own Sharia board. Both apply similar core principles with minor methodology differences, so a handful of stocks may differ between them.
- 📈 Concentration. Because screening removes conventional banks and financials, both funds lean heavily toward technology and other sectors. That concentration can help when tech does well and hurt when it doesn't.
- 🔗 They overlap heavily. The two funds move almost identically (very high correlation). Holding both adds little diversification, most investors pick one as their core US holding.
There's no universally "better" fund, and neither is "more halal" than the other. SPUS suits those who specifically want S&P 500 exposure at the lowest fee; HLAL suits those who prefer the FTSE methodology, want some mid-cap exposure, or use Wahed's ecosystem. Both are legitimate, widely-used Sharia-compliant products.
The Honest Part: What to Weigh Before You Invest
Halal ETFs are a genuinely useful tool, but responsible investing means understanding the trade-offs:
- ⚠️ Less diversification, more concentration. Screening shrinks the investable universe and tilts the portfolio (often heavily toward tech). That can mean sharper ups and downs than the broad market.
- ⚠️ Compliance is reviewed, not permanent. A stock that's compliant today can be removed if its finances drift out of line. Screening is an ongoing process, "halal" is not a one-time, forever stamp.
- ⚠️ Certification bodies differ. Different scholars and standards (for example, AAOIFI-inspired methodologies) can reach slightly different conclusions. If compliance matters deeply to you, it's worth checking the fund's methodology and consulting your own scholar.
- ⚠️ The usual market risks still apply. These are equity funds: prices rise and fall, past performance doesn't predict the future, and your capital is at risk.
The takeaway: HLAL and SPUS can make faith-consistent US investing far more accessible, but they're investments to research, on cost, holdings, methodology and risk, not guaranteed winners, and the final word on compliance is best confirmed with a qualified advisor.
How to Research Halal ETFs with Nemo.money
If Sharia-compliant investing interests you, the Nemo.money app is built to help you research before you decide:
- Invest from Just $1: Fractional shares let you start small with eligible stocks and ETFs.
- Zero-Commission Trading: Buy and sell eligible US-market stocks and ETFs without commission.
- AI-Powered Insights & Nemes: Explore data, sentiment and curated themed collections (Nemes) as a research starting point (for research, not recommendations).
Frequently Asked Questions (FAQs)
What is a halal ETF?
A halal ETF is a fund built to follow Islamic finance principles. It screens out companies whose main business is considered impermissible (such as alcohol, tobacco, gambling, weapons, pork and conventional interest-based finance), applies financial-ratio tests (for example on debt and interest income), and often calculates a "purification" amount so investors can donate any small non-compliant income to charity. The aim is to let Muslims invest in the stock market in line with their faith. This is general information, not advice.
What is the difference between HLAL and SPUS?
Both are large, US-listed Sharia-compliant equity ETFs, but they start from different indices. SPUS tracks a Sharia-screened version of the S&P 500 (large-cap only, ~0.45% fee), while HLAL tracks the FTSE USA Shariah Index, a broader universe that also includes mid-caps (~0.50% fee). They apply similar core screening with minor methodology differences, use different Sharia certification bodies, and overlap heavily, so most investors choose one rather than both. Neither is "more halal" than the other; both are examples to research, not recommendations.
Is the S&P 500 (VOO or SPY) halal?
Conventional S&P 500 funds like VOO and SPY are generally not considered Sharia-compliant, because the index includes conventional financial companies and other businesses that fail Islamic screening, and it doesn't apply financial-ratio tests. Halal ETFs such as SPUS and HLAL exist specifically as screened alternatives. Whether a specific fund meets your requirements is best confirmed with a qualified Sharia advisor. This is not advice.
Are halal ETFs a good investment?
That depends on your goals, faith requirements and risk tolerance, and this isn't advice. Halal ETFs make faith-consistent investing accessible and have at times performed competitively with the broad market. However, they charge higher fees than conventional index funds, are more concentrated (often tech-heavy), and carry the usual risk that prices can fall. They are examples to research, not recommendations, and your capital is at risk.
How can I invest in halal ETFs like HLAL or SPUS?
Both HLAL and SPUS are US-listed ETFs, so they can be bought through many brokerages and investing apps that offer US-market access. Apps like the Nemo.money app let you research and invest in eligible US-listed stocks and ETFs from just $1 with zero commission. Any fund named here is an example to research, not a recommendation; check the current holdings, fees and methodology, confirm compliance with your own advisor, and remember your capital is at risk.
Final Thoughts: Faith-Consistent Investing, Researched Carefully
The rise of halal ETFs like HLAL and SPUS is a genuinely positive development: it means observant Muslims no longer have to choose between participating in the stock market's long-term potential and staying true to their principles. Both funds have made Sharia-compliant US investing more accessible than ever.
As with any investment, though, the smart approach is to research rather than assume. Compare the fees, look at the holdings and methodology, understand the concentration and the risks, and, on the question of compliance itself, lean on a qualified scholar or advisor whose judgement you trust. Faith-consistent investing and disciplined, well-researched investing aren't in tension, at their best, they go hand in hand.
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This is not investment advice. Past performance is not indicative of future results. Your capital is at risk. See website for Risk Disclosure. Exinity ME Ltd (https://nemo.money) is regulated by ADGM's Financial Services Regulatory Authority.
