In today’s diverse and rapidly evolving financial landscape, investors have an increasing number of options that align with their ethical, religious, or personal beliefs. One such niche that has seen noteworthy growth is the sector of Halal-compliant investing.
As a critical aspect of Islamic finance, Halal investing adheres to the principles of Shariah law, which prohibits involvement in activities such as earning interest and investing in businesses that deal in products like alcohol or tobacco.
The rise in demand for Halal investment options has led to the advent of a variety of financial products that cater to this specific market, including Halal Exchange-Traded Funds (ETFs). These funds offer an efficient, cost-effective way to diversify one’s portfolio while staying true to Islamic principles. In an industry that’s traditionally been dominated by conventional investment vehicles, Halal ETFs represent an essential advancement for modern Muslim investors and others interested in ethical investing.
In this article, I will present an in-depth analysis of the best Halal ETFs to invest in for the year 2025.
Stay tuned as I delve into the specifics, including potential risks and rewards, to offer you a well-rounded perspective on the Halal ETFs that deserve your attention in 2025.

How do I invest in Sharia-compliant companies?
Investing in Sharia-compliant companies involves selecting investments that adhere to Islamic principles, which exclude businesses involved in prohibited activities such as alcohol, gambling, and usury. Here are the key steps and options for such investments:
- Stocks and ETFs: One of the most accessible ways to invest in Sharia-compliant companies is through individual stocks or Exchange-Traded Funds (ETFs) that follow Islamic principles. For instance, the Wahed FTSE USA Shariah ETF and the S&P 500 Shariah index offer portfolios of compliant stocks that exclude companies engaged in non-halal activities.
- Mutual Funds and Sukuk: Sharia-compliant mutual funds and sukuk (Islamic bonds) are other popular investment avenues. Sukuk differs from conventional bonds as they are asset-backed and do not involve interest payments, which are prohibited under Islamic law.
- Screening and Monitoring: Using platforms like Musaffa, investors can find detailed information about each company’s compliance status. This is crucial as it involves screening companies to ensure they do not engage in prohibited activities and that their financial ratios align with Sharia principles. Continuous monitoring is also recommended to maintain Sharia compliance over time.
- Diversification and Due Diligence: Diversifying your investment across different sectors and regions can help manage risk and enhance returns while adhering to Sharia law. It’s also important to conduct thorough due diligence to verify the compliance of your investments.
- Real Estate and REITs: Sharia-compliant real estate investments and Islamic Real Estate Investment Trusts (REITs) offer opportunities to invest in property markets while adhering to Islamic principles, focusing on income-generating properties like commercial real estate.
- Gold and Precious Metals: Investing in gold and other precious metals is also considered halal, as they are tangible assets with intrinsic value, aligning with the requirement to avoid uncertainty and speculation.
For anyone interested in Sharia-compliant investing, these options provide a way to align investment activities with ethical and religious values, offering both financial returns and peace of mind. Always ensure to use reliable sources and tools for Sharia compliance verification and stay updated on the best practices in Islamic finance.
What is halal ETF?
Halal Exchange-Traded Funds (ETFs) are investment vehicles that are specifically designed to be compliant with Islamic law, also known as Shariah law. These funds aim to provide Muslim investors, as well as those interested in ethical investing, an opportunity to invest in a diversified portfolio without compromising their religious beliefs or values.
ETFs, in general, are funds that track an index, a commodity, bonds, or a basket of assets. Unlike mutual funds, an ETF trades like a common stock on a stock exchange, offering investors the advantage of real-time pricing, lower fees, and more flexibility.
What makes an ETF halal?
Ensuring that an Exchange-Traded Fund (ETF) is Halal or Shariah-compliant involves a rigorous screening process that adheres to certain clear parameters. Here, we discuss these criteria in detail to give investors an in-depth understanding of what qualifies an ETF as Halal-compliant.
a) Business Activity
One of the foremost considerations is the nature of the business activities engaged by the companies that an ETF holds. Islamic finance principles prohibit investing in companies that generate revenue from non-Halal (forbidden) or doubtful sources.
Parameter: If the total revenue from non-Shariah compliant activities of all stocks held by an Equity ETF amounts to less than 5% of its overall revenue, then the ETF is considered Shariah-compliant from a business activity standpoint.
Restricted Business Sectors in Islam
Businesses typically considered not Shariah compliant and therefore not suitable for Halal investment include those involved in gambling and riba, the production or sale of alcoholic beverages, the pork industry, tobacco manufacturing or distribution, the cannabis sector (unless explicitly approved for medicinal use by Islamic scholars), and the adult entertainment industry. These sectors are avoided when identifying Halal-compliant investment opportunities.
b) Interest-bearing Securities and Assets
Islamic finance strictly prohibits earning money from money, like charging interest. Therefore, Halal ETFs cannot include companies that hold a significant number of interest-bearing securities or assets.
Parameter: The aggregate amount of interest-bearing securities and assets of all holdings of the ETF should not exceed 30% of the trailing 36-month average market capitalization of the ETF to be Shariah compliant.
c) Interest-bearing Debt
Another pivotal aspect of Halal investing is the avoidance of companies laden with debt acquired through interest-based lending, which is considered “Riba” and is prohibited in Islamic finance.
Parameter: The interest-bearing debt of the holdings in the ETF must be below 30% of the total market capitalization of the ETF.
These criteria form the backbone of the screening process for Halal ETFs. Only those funds that meet these rigorous conditions are certified as Halal or Shariah-compliant, offering Muslim investors and those interested in ethical investing a vehicle that aligns with their faith and values.

5 best halal ETFs to invest in 2025
In this section, I’ve identified the 5 best Halal ETFs to consider investing in for the year 2025 b
ased on factors like past performance, asset allocation, and Shariah-compliance certification.
Whether you’re a seasoned investor or just starting your investment journey, these options present an excellent opportunity to align your financial goals with your ethical beliefs.
1. Technology Select Sector SPDR Fund (XLhttps://screener.musaffa.com/cabinet/etf/XLKK)

XLK was created on 1998-12-16 by SPDR. The fund’s investment portfolio concentrates primarily on information technology equity. The ETF currently has 48956.56m in AUM and 67 holdings. XLK tracks an index of S&P 500 technology stocks.
2. Invesco Water Resources ETF (PHO)

PHO was created on 2005-12-06 by Invesco. The fund’s investment portfolio concentrates primarily on theme equity. The ETF currently has 1770.21m in AUM and 37 holdings. PHO tracks a modified liquidity-weighted index of US-listed companies that create products to conserve and purify water.
3. VanEck Semiconductor ETF (SMH)

SMH was created on 2000-05-05 by VanEck. The fund’s investment portfolio concentrates primarily on information technology equity. The ETF currently has 8848.56m in AUM and 26 holdings. SMH tracks a market-cap-weighted index of 25 of the largest US-listed semiconductor companies.
4. iShares Semiconductor ETF (SOXX)

SOXX was created on 2001-07-10 by iShares. The fund’s investment portfolio concentrates primarily on information technology equity. The ETF currently has 8188.49m in AUM and 31 holdings. SOXX tracks a modified market-cap-weighted index of 30 US-listed semiconductor companies.
5. iShares U.S. Medical Devices ETF (IHI)

IHI was created on 2006-05-01 by iShares. The fund’s investment portfolio concentrates primarily on health care equity. The ETF currently has 6050.58m in AUM and 63 holdings. IHI tracks a market-cap-weighted index of manufacturers and distributors of medical devices in the US

Benefits and risks of investing in ETFs
Benefits of Investing in ETFs
One of the most significant advantages of investing in ETFs is the opportunity for diversification. Unlike purchasing individual stocks, where your investment is tied to the performance of a single company, ETFs often hold an array of different assets, such as stocks, commodities, or bonds. This diversification can significantly reduce the level of risk associated with market volatility.
Another key benefit is liquidity. ETFs are traded on stock exchanges, much like individual stocks. This means that investors can easily buy and sell shares of an ETF during market hours, offering a level of flexibility not always present in other investment vehicles like mutual funds. Additionally, ETFs generally have lower expense ratios compared to mutual funds, making them a more cost-effective option for many investors.
Risks of Investing in ETFs
However, it’s essential to acknowledge the risks associated with ETF investments. The most obvious is market risk, which means that your investment will fluctuate based on market conditions. Although diversification can mitigate this to some extent, there is no guarantee against potential loss, particularly in a declining market.
Liquidity can also pose a challenge. While ETFs are generally liquid due to their tradable nature, some specialized or smaller ETFs may suffer from low trading volumes. This lack of liquidity can make buying or selling shares more difficult without impacting the price, particularly in volatile market conditions.
Is Option Halal? Read our complete guide!
Best Halal ETF Platform

When it comes to finding a reliable platform for Halal ETF screening and investing, Musaffa is the destination you’ve been searching for. Overseen by a panel of distinguished Islamic scholars and Shariah advisors, Musaffa prides itself on offering a curated selection of investment vehicles that not only conform to Islamic teachings but also meet the most rigorous industry standards.
Our Shariah board is at the core of our operations which is committed to continuous oversight of our technology, systems, and operational practices. This ensures that we remain fully compliant with Islamic principles at all times. In addition to that, our team of seasoned financial analysts conducts an exhaustive review of each publicly traded company we consider for our platform. Utilizing a wealth of publicly disclosed data, from annual reports to press releases, our analysts leave no stone unturned in ensuring each investment option aligns with Halal criteria.
But our vision extends far beyond mere compliance and quality screening. We are working towards the launch of a comprehensive Halal investment app that will be accessible in more than 150 countries. This ambitious initiative aims to solidify Musaffa’s standing as the go-to investment platform for Muslims and ethically-minded investors globally. So, if you’re on the lookout for a centralized hub that meets all your Halal investment needs, your search ends with Musaffa. Register with us today to embark on a fulfilling and compliant investment journey.
Bottom line
In an era where ethical considerations are increasingly integrated into financial decisions, Halal ETFs offer a meaningful pathway for Muslim investors and those who prioritize ethical investing. With strict compliance to Shariah law, these funds provide a moral and legal framework that aligns with Islamic teachings, effectively bridging the gap between faith and finance.
Halal investing has come a long way in a relatively short period, thanks to advancements in financial products and technology. By staying tuned to market trends and continually aligning your portfolio with your values, you can both honor your faith and fulfill your financial goals.

FAQs
1. Is there any halal ETF?
Yes, there are several Halal ETFs that comply with Sharia principles, avoiding investments in companies associated with alcohol, gambling, pork, and usury. Examples include the Wahed FTSE USA Shariah ETF (HLAL) and the SP Funds Dow Jones Global Sukuk ETF (SPSK).
2. What is the best Islamic ETF?
The best Islamic ETF can vary based on performance, fees, and investment strategy. Notable options include the Wahed FTSE USA Shariah ETF (HLAL) for its comprehensive U.S. market coverage and the iShares MSCI World Islamic UCITS ETF for global exposure
3. Which halal mutual fund is best?
The best halal mutual fund depends on individual investment goals and risk tolerance. Funds like the Amana Income Fund and the Iman Fund are highly regarded for adhering to Sharia principles while seeking to provide competitive returns.
4. How do I know if my ETF is halal?
To verify if an ETF is halal, check if it adheres to Sharia law by excluding companies involved in non-permissible activities and ensuring it passes financial ratio screenings. TPlatforms like Musaffa Invest offer resources to check the compliance of various ETFs
5. Is Microsoft stock halal in 2025?
As of 2024, Microsoft stock is generally considered halal as it passes the compliance screenings for revenue derived from permissible activities and financial ratios set by many Islamic investment platforms. However, investors are always advised to perform the latest checks as company activities and financials can change
6. What are the top 5 ETFs to buy?
The top 5 ETFs vary based on market conditions and investment focus, but generally include:
- SPDR S&P 500 ETF Trust (SPY)
- iShares MSCI World Islamic UCITS ETF
- Vanguard Total Stock Market ETF (VTI)
- Wahed FTSE USA Shariah ETF (HLAL)
- Invesco QQQ Trust (QQQ)
7. Who is the king of ETFs?
Vanguard is often considered the “king of ETFs” due to its massive scale and pioneering role in low-cost index fund investing, with a wide range of ETFs covering various asset classes and strategies.
8. Is iShares halal?
iShares offers specific Sharia-compliant ETFs such as the iShares MSCI World Islamic UCITS ETF, but not all iShares ETFs are halal. Investors should check the specific fund’s compliance with Islamic principles
9. Which index is halal?
Several indexes track Sharia-compliant companies, including the Dow Jones Islamic Market Index, the FTSE Shariah Global Equity Index, and the S&P Shariah Indices. These indexes exclude companies involved in non-halal activities
10. Is JP Morgan halal?
JP Morgan offers some Sharia-compliant investment products, but as a company, it engages in a broad range of financial services, some of which may not meet Islamic investment criteria. It’s essential to specifically look for their halal offerings if any.
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Disclaimer: Important information