Are index funds halal?
Conventional index funds fail (they hold banks, insurers, and other non-compliant stocks); sharia-screened index funds exist precisely to fix this and are broadly accepted.
Owning a fund means owning slices of its constituents. The S&P 500 includes conventional banks and insurers whose core business is riba — roughly a third of constituents fail screening — so SPY/VOO-style funds are impermissible for most scholars regardless of their virtues as products.
The screened equivalents track the same markets minus the failures: SPUS (S&P 500 Shariah), HLAL (FTSE USA Shariah), SPWO (global). You keep indexing's diversification and low maintenance; the cost is a higher expense ratio (0.45–0.65% vs ~0.03%) — the current price of screening.
The conditions that matter
- Use funds tracking a recognized shariah index (S&P Shariah, FTSE Shariah, DJIM)
- Purify dividends per the sponsor's published figures
Check your own portfolio
Penny categorizes everything you own — stocks screened live against AAOIFI-style rules with free rule-by-rule verdicts, asset classes tiered like this page, zakat and purification built in. No bank login.
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Is VOO or VTI halal?
No — both hold non-compliant financials among others. SPUS is the screened S&P 500 analog; HLAL and SPWO cover broader and global universes.
Are the halal index funds' fees worth it?
That's the real trade-off: ~0.45% vs ~0.03% compounds meaningfully over decades. The alternative is holding individually screened stocks yourself — zero fund fee, but you carry the monitoring. Many split: ETF core, screened-stock satellite.
Related
Educational summary of commonly held scholarly positions — not a fatwa or financial advice. Where scholars differ, we say so; for a binding ruling on your situation, consult your scholar. See how Penny screens.