Islamic ETF: The Things You Should Know

What is an i-ETF?

Islamic ETF (which we abbreviate as an i-ETF) means ETFs that are Shariah-compliant. In other words, i-ETFs include a basket of securities that follow Islamic rules.

Differences between conventional ETFs and i-ETFs

First, compared to a conventional ETF, an i-ETF has limited liberty to track benchmark index because it must only include Shariah-compliant companies. On the other hand, traditional ETFs can track any index.

Second, you need to carry out the management of i-ETF following Islamic rules and guidelines.

Third, for sure, Shariah committees review and audit the operation of i-ETF to ensure if everything operates according to Shariah.

Fourth, i-ETFs do not offer futures and options as one of their operations. Meanwhile, it does not mean that the securities for the i-ETFs must be not only stocks. Indeed, they can also be Sukuk and gold.

When was the first i-ETF launched?

The first i-ETFs came into existence in 2006, and it was listed on the Istanbul Stock Exchange. In 2008, Bursa Malaysia Exchange listed the first i-ETFs in Asia.

How to invest in i-ETFs?

It is not different from investing in other securities. You can easily trade Islamic ETFs through stockbrokers. Nowadays, we can trade six Islamic ETFs which are available on the Exchange:

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