Index and ETF

[amamm]

Salam Alaikum

I’ve been checking some ETFs such as SPUS and HLAL and they do have some non shariah compliant percentage , which would need to be purified.
Can the same be done with Nasdaq100, purifying the profits by donating the non compliant part to charity?

I’ve also researched a lot and there doesn’t seem to be a fatwa that directly addresses purifying ETFs or Indexes. They only addressed stocks and applied a 5% shariah compliance limit.

So, if for example the Nasdaq100 index or the SPUS ETF has 7% non shariah compliant income.
Can I just donate the 7% non shariah compliant profit to charity to purify the rest of my profits?

[UmarA]

Basically, no. You need to stick to the Islamic funds such as SPUS and HLAL as they are available to you to invest in.

[saad (Saad Malik)]

Sharing my response to this question from a different thread:

New Feature: Screen ETFs and mutual funds for shariah compliance (Beta)

Thank you for the feedback, @bloodysoul. The feature is still in beta so you can expect it to get better over time. Happy to share that an improved search/filtering experience is already on the roadmap. That said, the reality is that most ETFs will not be fully “halal” out of the box so it really boils down to your personal tolerance level of what you’re comfortable investing in. The better option, in my opinion, would be to use a service like M1 Finance to create a “pie” of just the compliant …

If you’re in the UK and don’t have access to M1 Finance, you can use Trading212 instead.

[amamm]

Thanks for your response, Saad.

I was able to get in touch with a Shariah scholar and they endorsed my approach.

[OsamaNabih]

Can you please explain what the scholar said?
From my understanding, your approach is to purify gains from any ETF by giving away a % proportional to the non-Sharia compliant holdings inside it?