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VWRA Vs Islamic ETF
AOA
I have a query about investing in ETF funds , Islamic vs conventional
I am Intrested in investing in VWRA which is a conventional fund deals with thousands of companies and some part of their investment is in gambling alcohol etc business but this is not their core business which is health science AI Computing and technology. They charge 0.22% per year
Now compared this with an international Sharia ETF , these funds are much smaller avoid un Islamic investment but do have contacts with conventional banking systems. They charge 0.66 % annually which to me is partially due to lack of competition and making more profit
So my key question is can I invest in VWRA or it’s absolutely prohibited under shria law. I have seen certain Islamic financial advisors declaring some conventional banking products halal or haram though they are part of the same banking system but the halal is always expensive
JazakAllah
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3 Replies
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VWRA Vs Islamic ETF
updated 3 weeks ago
2 Members
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Replies
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Our preference should be to choose funds that do not invest in Haram businesses at all. If no such option is available, one should at least select a fund whose investments are predominantly in Halal businesses, and give away in charity whatever portion of the fund’s income is earned through a prohibited business. Where a Shariah-compliant fund or index is available, it is preferred to opt for it, as it saves the time and effort of sorting out these matters on one’s own.
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Thank you for your reply
These companies deal n Trillion of dollars s you know. There is no fixed investment pattern. They keep changing investment according to the market situation.
It’s impossible to keep track of my few thousand dollars and find out how much of it was invested in what pattern , what was the profit on each allocation and then give that part as charity.
The issue with so called Islamic funds is that they charge 3 ties more fee that can not be justified plus they are new small without any solid history and can go bust any time.
From what I know from Ghamdi sahab’s idea about life insurance , he thinks it’s allowed AND after you have been nested your are not responsible of keep track of your tiny amount of money as where and how was it invested provided the main business of the insurance company is not haram like it does not only invest in alcohol and gambling. The same principle can be applied for investing in funds ?
Regards
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The principle you have referred to regarding insurance is correct, but there is a subtle yet important difference between the two cases which needs to be understood.
In insurance, the primary business of the company is insurance itself — mutual help through a pool of premiums — which is Halal. What the company then does with that pool as a mode of investment is secondary to its primary business. Ideally, that too should be Halal, but it is not something the insured person can be held responsible for.In mutual funds, ETFs, and index funds, the situation is different: here the primary activity is the investment in the basket of portfolios itself. By buying into the fund, the person is directly involved in, and therefore responsible for, the investments being made on his behalf. This is what distinguishes the two cases, and it is why more care is required here than in the case of insurance.
Ideally, all of the investments should be Halal. However, in cases where a minor portion ends up invested in Haram businesses and no better alternative is available, then that minor portion — or one’s best estimate of the income belonging to the objectionable investments — should be given away in charity. You are right that precise tracking is impossible in a fund dealing with thousands of companies; that is why a reasonable best estimate suffices. Allah does not burden a soul beyond its capacity, but He does expect us to do what is within it.
As for Shariah-compliant funds: if a prescanned portfolio of Halal investments is available, it is always better to opt for it. The return may be lower or the fee higher in comparison, but for a Muslim, the sense of piety should outweigh material gains. That said, if such an option is genuinely too risky or too expensive, then of course it is not feasible, and one may invest in a conventional fund of predominantly Halal businesses on the terms described above.Just for reference, giving objectionable portion of income in charity is not something new. Ghamidi Sahab has said the same w.r.t interest earned in a Savings Account.
And Allah knows best.
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