What Sharia Compliant Fund / ETF are you invested in currently?

[coelohim]

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[hoang25mai]

@coelohim Very difficult to find a shariah compliant etf that does not have companies that openly support Isreal. No point in being shariah complaint if you support genocide

 

[coelohim]

@hoang25mai Do you also not actively use or buy from these companies in day to day life. And if so, how do you do so?

 

[hoang25mai]

@coelohim I try my best to avoid these companies whenever I can, buy from local brands, boycott those who openly support Isreal

 

[delm]

@coelohim ISDW + ISDE

 

[thunderlight]

@coelohim I also share concerns over how a lot of the holdings within shariah compliant ETFs support Israel. I now invest in individual stocks using the strategy from this post.

https://www.reddit.com/r/HalalInvestor/s/4ISWqXtkw2

 

[annache]

@coelohim I dont believe in "sharia compliant" investing. These ideas are derived from a period when there were no banks, no securities, no capital markets, and no regulators and no understanding of modern finance. So scholars are just applying their own rules. It is better to apply maqasid sharia (higher principles - fairness, justice, protection of wealth) to investment.

 

[coelohim]

@annache Which etf's would you consider investing in instead?

 

[annache]

@coelohim I use asset allocation etfs like VGRO and XGRO (Vanguard and Blackrock). If you are interested in ethical issues I would research the ESG (environmental, social, and governance) based etfs (which I have not done) - there is a lot of them. I recently saw an article in Euromoney where Islamic finance practitioners were linking up with ESG investors. Its more important to take account of your life cycle and risk tolerance.

 

[coelohim]

@annache Interesting. What sort of companies do those two ETFs invest in mainly? Are they more diverse compared to Sharia compliant ETFs which are tech heavy.

 

[annache]

@coelohim Those etfs are passive index funds following broad market stock and bond market indexes in all major developed and emerging markets - US, Europe, Asia etc. They have market weightings in all major sectors including tech and finance, so more diverse than sharia weightings.

I like them because most active managers charge higher fees, and dont beat the index returns in the long run. Also from theory, the market portfolio is an efficient portfolio and an index fund is the closest we can get to the market portfolio. These are listed in Canada, but there are similar offerings in the US.

 

[coelohim]

@annache How do these compare to S&P 500 or other global indexes? And why do you choose them over the others?

 

[annache]

@coelohim The S&P500 is just large cap US. The Vanguard and Blackrock asset allocation etfs have Europe and Asia in them as well and the US representation is broader - more medium cap - so better diversified. You can tailor your risk exposure with a choice of about half dozen etfs in this family from conservative (high fixed income) to higher risk all-equity (no fixed income), andthey are cheap - about 25 bp. I used to build this myself with several separate etfs but now they do it for me.

I am not promoting Blackrock of Vanguard over others, I think there are others now that do this. I think Wealthsimple (roboadvisor) has a sharia compliant version, but its more expensive with the deficiencies you mention.

So you can get the standard 60/40 global portfolio in one shot (VBAL or XBAL).

You should peruse their websites or other ETF info on sites like Morningstar.

 

[coelohim]

@annache What is your reasoning regarding the banks that would be part of these ETFs?

 

[annache]

@coelohim We could go into a long discussion about the meaning of riba at the time of the prophet.

But put simply, banks, the payments mechanism, insurance, and finance are a large and important part of the economy, as attested to by their millions of customers, businesses, and governments around the world that deal with them. They constitute a large part (about a quarter plus or minus depending on the country) of the capitalization of stock market indexes. Excluding them would be a large deviation from a fully diversified passive portfolio, and greatly limit the choices of active managers. So the justification of excluding them has to be put upon those who propose to do so.

There were no banks or securities markets at the time of the prophet, no regulation of the financial sector, and no concept of financial intermediation or portfolio management. The exploitive redoubling of unpaid debt (riba) by greedy moneylenders burdening the poor at the time of the prophet is clearly not the same as modern day interest, its was like loan sharking.