Navigating the S&P 500 for Everyday Muslim Investors

The S&P 500 Index Fund Is Not Halal. But Here's What You Can Do Instead.

If you've been putting off investing because you're not sure what's actually permissible, you're not alone. The S&P 500 is the most talked-about investment benchmark in America, but for Muslim investors, it comes with a serious problem: most companies that comprise of the S&P 500 are not Sharia-compliant (more on that later). The good news? A growing list of halal index funds gives you real market exposure without compromising your faith.

Why Isn't the Standard S&P 500 Halal?

The S&P 500 tracks 500 of the largest publicly traded US companies and that breadth is exactly the problem. When you invest in a standard S&P 500 index fund, you're buying a slice of every company in it, including banks charging interest, alcohol producers, casinos, and insurance companies operating on conventional models. Islamic principles prohibit all of these.

But it's not just about which industries are in the index. Even companies with permissible core businesses can fail Sharia screening if their finances don't meet specific thresholds. According to Zoya Finance, a popular halal stock screening app, fewer than half of S&P 500 companies (roughly 226 out of 500) actually meet Sharia criteria.

The Two Filters Every Halal Investment Must Pass

Sharia screening typically works in two stages, based on standards from organizations like AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions):

1. Business Activity Screening: The company's core business can't involve alcohol, gambling, pork, adult entertainment, weapons manufacturing, or conventional interest-based financial services. If it does, it's out, full stop.
2. Financial Ratio Screening: Even if the business itself is permissible, its balance sheet has to meet certain limits. Interest-bearing debt should stay below 33% of market capitalization. Income from non-compliant sources (like interest) shouldn't exceed 5% of total revenue. Cash and interest-bearing securities should be under 33% of the company's equity value.

These two filters together weed out a significant chunk of the S&P 500 — which is why you need a specialized fund, not the standard index.

What Are Halal Index Funds and How Do They Work?

Halal index funds apply this two-stage Sharia screening to an existing universe of stocks, then track the filtered result as an index. Most are structured as ETFs (Exchange-Traded Funds), which means you can buy and sell them on a brokerage account just like a regular stock. They're diversified, low-cost, and transparent; ticking the same practical boxes that make index investing popular in the first place.

The key difference is that instead of tracking the full S&P 500, they track a Sharia-screened version of it, basically a similar benchmark that's been filtered for compliance. That naturally leads to a heavier concentration in sectors like technology, healthcare, and consumer goods, since financial companies and sin-industry stocks are screened out.

The Best Halal Index Funds Available to US Investors Right Now

SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS)

SPUS is the most well-known halal ETF in the US market. It takes the S&P 500, runs it through Sharia screening, and holds the roughly 200–230 companies that pass. Launched in December 2019, it carries an expense ratio of around 0.45% and has over $2 billion in assets under management as of early 2026. It's heavily weighted toward tech and healthcare — and it has actually outperformed the conventional S&P 500 since its launch, which surprises a lot of people.

Wahed FTSE USA Shariah ETF (HLAL)

HLAL was launched in 2019 by Wahed Invest and tracks the FTSE Shariah USA Index. It screens large and mid-cap US companies for compliance and has a 0.50% expense ratio. Performance has been solid, though it sometimes trails SPUS slightly. If you already use Wahed's investment platform, HLAL integrates naturally into that ecosystem.

Manzil Russell Halal USA Broad Market ETF (MNZL)

MNZL is the newest of the three, launched in November 2025. It screens the Russell 1000 down to approximately 450 companies, giving it broader market coverage than SPUS or HLAL. Its expense ratio is 0.40% — the lowest of the main US-listed halal equity ETFs. It also applies an extra ethical filter on top of standard Sharia screening, which may appeal to investors who want a stricter approach.

Amana Mutual Funds

If you prefer mutual funds over ETFs, Amana Mutual Funds, managed by Saturna Capital, has been around longer than any of the ETF options. They offer several Sharia-screened stock funds and have a track record stretching back decades. They're a solid choice if you're investing through a 401(k) or IRA that offers mutual fund access but doesn't support ETF trading.

Other Options Worth Knowing

• SP Funds S&P Global Technology ETF (SPTE): Sharia-compliant tech exposure across global markets. Returned 26.37% in 2025.
• Wahed Dow Jones Islamic World ETF (UMMA) and SP Funds S&P World ETF (SPWO): Both offer global halal equity exposure beyond the US.
• SP Funds Dow Jones Global Sukuk ETF (SPSK): The only US-listed ETF giving you access to sukuk — Islamic bonds — if you want a fixed-income-style halal option.

Does Halal Investing Mean Lower Returns?

This is the question most Muslim investors worry about. The data is encouraging, SPUS for example, has outperformed the conventional S&P 500 since its inception. Part of the reason is structural: by screening out heavily indebted companies and traditional financial institutions, halal funds naturally avoid some of the sectors that take the hardest hits during market downturns.

That said, no investment is without risk, and past performance doesn't guarantee future results. Halal ETFs tend to be more concentrated in tech, which means they can be more volatile during tech selloffs. Diversifying across a few halal funds including global options like SPWO or UMMA can help smooth that out.

What About Purification of Impermissible Income?

Even the most rigorously screened halal fund may occasionally earn a small amount of impermissible income. For example, interest on cash held in the fund's account. Islamic scholars address this through a concept called purification: you calculate the non-compliant portion of your earnings and donate that amount to charity.

This is separate from Zakat, it doesn't count toward your obligatory giving. Many halal ETF providers, including SP Funds, publish an annual purification ratio to make this calculation easy. AAOIFI recommends doing this once a year based on actual non-compliant revenue figures.

Where to Hold Your Halal Index Funds

You can buy halal ETFs like SPUS or HLAL through any standard US brokerage such as Fidelity, Charles Schwab, and Vanguard all support ETF trading. For tax efficiency, consider holding them inside a Roth IRA or traditional IRA if you're eligible. If your employer's 401(k) doesn't offer halal options, you may open a separate IRA and invest there independently.

Some platforms like Wahed are built specifically for Muslim investors and handle the screening and purification process for you, a good option if you want a hands-off approach.

The Bottom Line

The standard S&P 500 isn't halal and investing in it without a Sharia-compliant filter puts you in territory most Islamic scholars consider impermissible. But halal index funds like SPUS, HLAL, and MNZL make it straightforward to invest in US equities while staying within Islamic principles. They're low-cost, accessible through any major brokerage, and have delivered competitive returns. Your next step: open a Roth IRA or brokerage account, pick one of the funds above, and start building a portfolio that works for both your finances and your faith.