How to set up a brokerage account with all halal investments with ideal asset allocation for young folks (20s/30s)?

[guswilby]

Asslamualycum,

I am in my mid-20s, trying to understand the best way to set up auto investing into halal index funds that will safely grow over time for either retirement or future use. I am not an expert in this area, but after listening to hours of video content about halal ETFs, real estate, and mutual funds to invest in and also reading quite a few Reddit posts in the last few months, here is where I sort of landed. Please... please feel free to correct me if you either strongly disagree or think that my investment setup is not ideal for valid, true reasons.

As a Muslim and firm believer in halal, long-term investing, there aren't a ton of platforms or guides that will explicitly guide you through exactly what you need to do to set up your investments from start to finish. THIS Reddit post is also not going to achieve that for you unfortunately and I strongly want to caveat by saying THIS IS NOT A FINANCIAL ADVICE and I am just trying to both clarify and potentially start a guide for how a young professional Muslim individual should aim to set up their portfolio for long term investing for retirement for specifically.

As far as I have done my research, I have 2 different routes that I would suggest to a friend who is also Muslim and specifically wants to invest most easily, with less hassle, less maintenance, and a straightforward way to set up my investment portfolio.

• Go with Wahed Invest (EASIEST WAY)
• Halal ETF Fidelity Portfolio Baskets (WHAT I USE)

Go with Wahed Invest (EASIEST WAY):

Honestly, for most folks who are either new or have very limited skills or time to study up or invest into learning how to invest their money in the long run, I would suggest, this is the easiest way you could set up your portfolio, with almost no hassle, no monthly maintenance approach. I used to have this until I recently decided to switch over to Fidelity.

The main reason is the annual management fee of 0.49% or 0.79%, which can eat away at my investment in the long run. Otherwise, Wahed Invest is amazing. All I had to do was create a new account, link my bank account, and set up a specific amount of money I wanted to automatically withdraw from my bank account to my investment account. Wahed Invest walks you through a list of steps 1 by 1, so anyone with very minimal knowledge of investing can set it with no issues.

One small recommendation with Wahed, they will ask you to choose a specific risk tolerance for your investments. For young professionals like myself, I recommend you choose the most aggressive or aggressive option as long as you have set a goal to invest in the long run (i.e., 25 to 30 years).

Investment Funds Wahed Invest Use (as far as I know):

- Wahed FTSE USA Shariah ETF (HLAL)

- Wahed DOW JONES Islamic World ETF (UMMA)

- SPDR Gold Minishares (GLDM)

- Amana Participation Institutional (AMIPX)

- SP FUNDS DOW JONES GLOBAL SUKUK ETF (SPSK)

- Cash

Halal ETF Fidelity Portfolio Baskets (WHAT I USE):

I have recently switched to this strategy b/c of a couple of reasons:

• I did not want to pay the annual management fee of 0.49% b/c fees can eat away on my return
• I wanted to control what ETF funds I wanted to invest into

What I had to do for setting up Fidelity is open a new brokerage account, go into Fidelity Portfolio Baskets (low fee of $4.99/month), and create a basket of these ETF funds:

- SP FUNDS S&P 500 SHARIA INDUSTRY EXCLUSIONS ETF (SPUS) => 70%

- WAHED DOW JONES ISLAMIC WORLD ETF (UMMA) => 10%

- SP FUNDS DOW JONES GLOBAL SUKUK ETF (SPSK) =>

- SPDR GOLD MINISHARES TRUST (GLDM) => 5%

- SP FUNDS S&P GLOBAL REIT SHARIA ETF (SPRE) => 5%

- SP FUNDS S&P WORLD EX-US ETF (SPWO) => 5%

Again, most of the funds as you can see with Fidelity are pretty much the same as with Wahed Invest, but the only difference is less annual management fee. If Fidelity Portfolio Baskets remain at $4.99/mo, that is still far cheaper than the 0.49% management fee. Thus, I decided to go with Fidelity for now.

I wanted to share more of my thoughts, but this post is getting quite long now, so I will stop here.

I would love to get some feedback from experts who have already invested in halal funds with other institutions maybe and see what they think. Kind education feedback would be useful for many Muslims living in the US to build wealth in a halal way. Thanks!

 

[sbmor777]

@guswilby I agree don't use Wahed. The fees are not worth what they offer as it's just as easy to simply open a brokerage account and invest in the same ETFs Wahed offers.

I use Vanguard and mostly keep my money in SPUS, SPSK, and SPRE. I used to use the Amana funds but the fees are higher on those as well.

There are other ETFs out there too, I made a post with my running list of sharia-compliant funds I've run across.

https://www.reddit.com/r/IslamicFinance/s/vsAzZ7TK43

 

[guswilby]

@sbmor777 If I invest in UMMA ETF fund, is it worth also investing in Amana mutual fund as well? Assume both are for international coverage. Just trying to understand whether to invest in 1 or the other or maybe both? Benefits and drawbacks of ETF vs. mutual fund would be useful as well.

 

[dolomite1]

@guswilby My comment is that for your baskets, UMMA and SPWO are very similar with SPWO having a lower MER. Is there a reason you’re holding the two? Perhaps because SPWO is still too new.

I love what you’re doing with the guide. Many people come to reddit to do research so hopefully this is helpful for them. May Allah reward you for it. Ameen.

 

[guswilby]

@dolomite1 Yes, investing in both UMMA and SPWO is somewhat the same b/c both are focused on exposure to international markets. My thought process is that SPWO is new and has slightly fewer American companies than UMMA, so if the international market does well in the future, I can be covered for it. Just trying to over-diversity both the combination of local (US market) and international ground, that's all.

 

[realitywild777]

@guswilby Wealthsimple is great for self directed investing.

ETF's to buy: SPUS, SPRE, SPSK, HLAL, GLDM, UMMA,WSHR

 

[dolomite1]

@realitywild777 Yes and it is free. But I’m not sure if people outside Canada can use it.