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Best Islamic ETFs to buy in 2022
Here our experts have picked out the best ETFs that subscribe to the principles of Islamic investing. This page goes through each of them in detail, and then takes a quick look at why you might want to put your money into this type of ETF.
What are the top sharia ETFs to buy?
The best ETFs are ranked in the table below. As this type of investing is relatively new, there aren’t all that many options just yet. However, you can still find the latest price information for any of them by clicking the links in the table, or scroll down to read more about what each one offers in turn.
|#||ETF ticker||ETF name|
|1||ISWD||iShares MSCI World Islamic UCITS|
|2||ISUS||iShares MSCI USA Islamic UCITS|
|3||ISDE||iShares MSCI Emerging Markets Islamic UCITS|
|4||AMAP||HANetf Almalia Sanlam Active Shariah Global Equity UCITS|
1. iShares MSCI World Islamic UCITS ETF (LON: ISWD)
iShares is the main provider of Islamic ETFs and this is one of three that began trading in 2007. It owns stocks in companies that comply with Islamic investing principles from all over the world, including the likes of Johnson & Johnson, Nestle, and Procter & Gamble – its three largest holdings.
The ETF has only really had one poor year, in 2018, but has routinely performed well outside of that. Over the last few years it has grown by more than 30%, and it’s probably the most stable ETF of all the options available because it is diversified across countries as well as across industries.
2. iShares MSCI USA Islamic UCITS ETF (LON: ISUS)
The second of iShares’ 2007 batch of Islamic ETFs is this one, which has the same principles as the world ETF but focused entirely on companies that are listed in the United States. Many of its holdings are similar to the global fund – Johnson & Johnson and Procter & Gamble top the list again.
This is a good ETF to own if you want specific exposure to the US market, as it gives you a broader range of companies from within the NYSE and NASDAQ stock exchanges. Otherwise, its returns have largely mirrored those of the global fund, with a little over 30% growth in the last three years.
3. iShares MSCI Emerging Markets Islamic UCITS ETF (LON: ISDE)
The final iShares offering is one that picks companies exclusively from emerging markets. These are predominantly based in Asia, with more than half of the portfolio made up by companies from South Korea and Taiwan.
That makes this a much more volatile ETF than the two above it in this list. It’s more reliant on a handful of companies; 20% of the money in the fund is invested in TSMC alone, which is more than double the largest holding of either the global or US-only ETFs.
The 3-year performance represents a return of a little over 20%, but you should be prepared to see more extreme returns (in both directions). Its bad years are likely to be worse but the good years may well be better than a more stable, diverse fund.
4. HANetf Almalia Sanlam Active Shariah Global Equity UCITS ETF (LON: AMAP)
The Almalia ETF is actively managed and owns a small range of 25-30 companies from around the world. The largest of those holdings is the Chinese ecommerce company Alibaba, while Samsung Electronics and Taylor Wimpey – a British housebuilder – round out the top three.
That list gives you a clue as to one of its biggest strengths: diversity. It’s likely to benefit from the same forces that have made the iShares global fund strong for many years, namely the fact that it owns lots of large companies from different countries and sectors. Indeed, it probably has a more balanced range of holdings.
The reason it’s only featuring late on in this list is because it’s relatively new. It has only been trading since late 2020, so there is a limited amount of stock market action to go on.
Where to buy the best sharia ETFs
To invest in any of these ETFs you need to find an online broker. ETFs trade like regular stocks, so you can buy or sell shares in them at any time through the broker. Choose from one of the options below to get started.
What is an Islamic ETF?
It’s a fund that trades on the stock market and which only owns stocks in companies that comply with sharia law. An ETF has its own ticker symbol (you can find the right one for each of the funds on this page in the table at the top) and gain access to it by buying shares through a broker.
The exact principles of Islamic investing can vary, but broadly it means avoiding certain forbidden practices. These are any involvement in alcohol, gambling, or pork, as well as companies that profit from interest or have excessive amounts of debt.
In reality, there is usually some leeway, so that companies which make the vast majority of their money from permitted industries qualify as halal. It’s a good idea to check the documentation for each ETF to see where they put the line.
Are halal ETFs a good investment?
Generally speaking, yes they are. In fact, the guidelines for Islamic investing are good ones for any new or beginner investor. By following these practices you avoid putting your money in risky companies, or those that might be open to industries that could be the victims of new government regulation at any time.
Any ETF that creates a diverse portfolio and filters out those companies with lots of debt makes for a good, low-risk investment. ETFs require little effort to maintain as well, and you can build your wealth relatively simply by putting a small amount of money into the ETF on a regular basis.
As with any investment, it still pays to take the time to follow the news for any developments that might cause a big change in the markets and affect the state of your money. Use the links below to follow the relevant updates, or sign up to a broker to get started right now.
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