Asslam o Alaikum. I’ve recently seen that the S&P 500 has been reaching all time highs. I really want to invest in $SPY or $SPX for options but I don’t know if it’s haram. Please can someone let me know. God is the greatest.
SPY has 30-40% companies non compliant as per different screeners. Maybe @saad has more accurate number.
Your options are the (1) DIY (2) Shariah Compliant Mutual funds , ETFs (3) Separately account managers.
thanks
Adib
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So does that make $SPY and $SPX haram to trade? I already traded but I’m still in a loss of $-200 what should I do.
Allah knows best.
As a whole, the Index and hence the ETFs that mimic SP500 are considered not Shariah compliant.
Coming to your second point, we inadvertently do things due to our lack of awareness. About the loss, its your decision to continue holding or not. In the case of a stock becoming non compliant, I have read about a 90 day grace period. Not sure if that applies in this case but sounds like an upper bound.
Good luck.
Okay. Just to be clear, $SPY and $SPX is 100% haram and shouldn’t be traded right?
As you can tell, I do not tend to use the H word.
In terms of Shariah compliance, they are somewhere in between 100% non compliant and 100% compliant.
In your opinion. Would you trade it? Do you know anyone who might know the answer whether it’s halal or haram. I respect that you don’t want to say it’s forbidden because you don’t know, Alhamdulillah that’s fine.
When you mean by “trade”, do you mean buying and selling over shorter durations of time? If so, i personally try to invest with a long term mindset. at times, the investment is a mistake or the gains are realized in a much shorter time span than expected. but I am not trying to flip stocks (and by extension etfs) for small gains due to the tax aspects in addition to the additional chance of increased mistakes.
If you are keen on a SPY/SPX like vehicle, there are 2 ETFs that are Shariah compliant as per their websites.
Roughly 15% of the companies in the S&P 500 belong to the financial sector. This includes several companies such as banks and insurance firms whose business models rely on riba. An alternative would be to invest in $SPUS which is an ETF that aims to track the S&P 500 while excluding the shariah non-compliant companies.
EDIT [November 2024]: Here’s a more comprehensive answer:
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Asslam o Alaikum Saad. I know this Is a very tough question to ask any Muslim. But would you say that investing in $SPX or $SPY is forbidden to trade since it contains 15% financial securities.
Personally, I would not feel comfortable unless it was my only option in a company 401k.
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Don’t trade the $SPY. I’m not sure what else you need to hear but from the back and forth it seems that the answer you need to hear.
If any fund contains such a large portion of companies that are involved in primarily impermissible activities it really doesn’t even need to be said it should come second nature to us to understand that dealing in such things is not allowed.
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