[Wiki: Sharia-compliant investing]

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MrCurious
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[Wiki: Sharia-compliant investing]

Post by MrCurious »

[Moved into a new thread from: Vanguard ESG Global All Cap UCITS ETF --admin LadyGeek]
assyadh wrote: Tue Apr 13, 2021 11:58 am Really interested by this new Vanguard ESG Global All Cap UCITS ETF. It is the closest thing we now have to a muslim compliant ETF (no alcohol, adult entertainment, gambling etc..)
There are alternatives without so-called vice stocks in iShares SRI range. You could combine SUSW MSCI World (Developed) and SUSM MSCI Emerging markets ETFs to get total world exposure.

However, this new Vanguard ESG ETF is superior in my opinion. It also includes small-cap, has higher diversification through 7,500+ companies as opposed to less than 600 from iShares, and everything is contained in a single ETF which reduces complexity.
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by TedSwippet »

assyadh wrote: Tue Apr 13, 2021 11:58 am Really interested by this new Vanguard ESG Global All Cap UCITS ETF. It is the closest thing we now have to a muslim compliant ETF (no alcohol, adult entertainment, gambling etc..)
I've always understood Shariah ETFs to be compliant in the way you might be looking for, and there are a few listed in London, including one nicely diverse all-world ETF:

iShares MSCI World Islamic UCITS ETF | ISWD

Is there something about these that is undesirable, so that the ESG Global All Cap ETF is preferable? The new Vanguard ESG ETF handily undercuts the TER of the iShares Shariah ETF linked above, but aside from that?

This has come up a couple of times in the past, and I'm thinking about whether it might perhaps be useful to add a bit about this to the wiki. But as it's not my area, I could use some guidance.
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by assyadh »

TedSwippet wrote: Tue Apr 13, 2021 12:13 pm
assyadh wrote: Tue Apr 13, 2021 11:58 am Really interested by this new Vanguard ESG Global All Cap UCITS ETF. It is the closest thing we now have to a muslim compliant ETF (no alcohol, adult entertainment, gambling etc..)
I've always understood Shariah ETFs to be compliant in the way you might be looking for, and there are a few listed in London, including one nicely diverse all-world ETF:

iShares MSCI World Islamic UCITS ETF | ISWD

Is there something about these that is undesirable, so that the ESG Global All Cap ETF is preferable? The new Vanguard ESG ETF handily undercuts the TER of the iShares Shariah ETF linked above, but aside from that?

This has come up a couple of times in the past, and I'm thinking about whether it might perhaps be useful to add a bit about this to the wiki. But as it's not my area, I could use some guidance.

The iShare one has 346 holdings (...). Essentially, to carry the Shariah stamp, an ETF needs to have the holding be compliant with a set of rules (no alcohol, no interest based companies such as banks, no companies that actively use debt to transact etc..).
Often the way the financial services company would do it is that they have a board supervising the nature of their business. In this case I assume MSCI just digged into the companies data and excluded some, based on feedback from a similar board.
This is onerous to do and you end up with a lot of companies expelled from the Index. I personally think (and may be wrong) that in this day and world it is hard to find companies (or rather impossible) that don't use debt in a way of another.

This new ESG fund is the closest thing I know that has enough holdings to be worth considering, and low fees. the iShares one is charging 0.6%, a little too steep for me. It still has ~10% of banks or financial services though.
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by TedSwippet »

assyadh wrote: Tue Apr 13, 2021 3:33 pm The iShare one has 346 holdings (...). Essentially, to carry the Shariah stamp, an ETF needs to have the holding be compliant with a set of rules (no alcohol, no interest based companies such as banks, no companies that actively use debt to transact etc..).
Thanks. When I wrote "nicely diverse" I hadn't picked up on the relatively low number of holdings. I can see why that would reduce its appeal. I'm aware of most of the Shariah rules, but the no debt one is one came as a mild surprise. Had I thought it through, I might have realised -- I hold a couple of Shariah-compliant savings accounts in the UK, and they have this same restriction.
assyadh wrote: Tue Apr 13, 2021 3:33 pm Often the way the financial services company would do it is that they have a board supervising the nature of their business. In this case I assume MSCI just digged into the companies data and excluded some, based on feedback from a similar board.
This is onerous to do and you end up with a lot of companies expelled from the Index. I personally think (and may be wrong) that in this day and world it is hard to find companies (or rather impossible) that don't use debt in a way of another.
Probably the case. Maybe over time the number of companies that fit the required profile will grow? Although, these ETFs have already been around for several years now, so perhaps the limit is already reached.
assyadh wrote: Tue Apr 13, 2021 3:33 pm This new ESG fund is the closest thing I know that has enough holdings to be worth considering, and low fees. the iShares one is charging 0.6%, a little too steep for me. It still has ~10% of banks or financial services though.
The 0.6% is definitely a bit of a turn-off. Does the new ESG fund comply with all Shariah requirements, or is it a sort-of "Shariah-lite"; that is, it is probably mostly okay, but without the purity certification?

Just trying to find my way around the topic (my six months living in a Muslim country in the late 1980's doesn't qualify me as any kind of expert!). Do you think there's enough material here to make a worthwhile wiki article, or not? As noted, it's come up a couple of times before, but probably doesn't rise close to "frequently asked".
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by assyadh »

TedSwippet wrote: Tue Apr 13, 2021 5:05 pm
assyadh wrote: Tue Apr 13, 2021 3:33 pm The iShare one has 346 holdings (...). Essentially, to carry the Shariah stamp, an ETF needs to have the holding be compliant with a set of rules (no alcohol, no interest based companies such as banks, no companies that actively use debt to transact etc..).
Thanks. When I wrote "nicely diverse" I hadn't picked up on the relatively low number of holdings. I can see why that would reduce its appeal. I'm aware of most of the Shariah rules, but the no debt one is one came as a mild surprise. Had I thought it through, I might have realised -- I hold a couple of Shariah-compliant savings accounts in the UK, and they have this same restriction.
assyadh wrote: Tue Apr 13, 2021 3:33 pm Often the way the financial services company would do it is that they have a board supervising the nature of their business. In this case I assume MSCI just digged into the companies data and excluded some, based on feedback from a similar board.
This is onerous to do and you end up with a lot of companies expelled from the Index. I personally think (and may be wrong) that in this day and world it is hard to find companies (or rather impossible) that don't use debt in a way of another.
Probably the case. Maybe over time the number of companies that fit the required profile will grow? Although, these ETFs have already been around for several years now, so perhaps the limit is already reached.
assyadh wrote: Tue Apr 13, 2021 3:33 pm This new ESG fund is the closest thing I know that has enough holdings to be worth considering, and low fees. the iShares one is charging 0.6%, a little too steep for me. It still has ~10% of banks or financial services though.
The 0.6% is definitely a bit of a turn-off. Does the new ESG fund comply with all Shariah requirements, or is it a sort-of "Shariah-lite"; that is, it is probably mostly okay, but without the purity certification?

Just trying to find my way around the topic (my six months living in a Muslim country in the late 1980's doesn't qualify me as any kind of expert!). Do you think there's enough material here to make a worthwhile wiki article, or not? As noted, it's come up a couple of times before, but probably doesn't rise close to "frequently asked".
It is definitely more of a Shariah lite fund than a true Shariah approved investment. Unfortunately the Shariah investment space looks like what it was to buy mutual funds in the 80s. high fees etc..

It would be worthy of an article IMO, since this new ESG fund still excludes almost all categories that are non permissible (ie guns, alcohol, gambling, adult etc). I can help you on that if needed.
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by MrCurious »

It's important to note that there isn't a single set of Sharia rules. There are numerous legal schools with differing opinions.

Speaking as a European Muslim, when I look at MSCI Islamic Index which is used as a basis for Shariah ETF, I find it too restrictive. It doesn't contain companies that produce music (this one is an especially restrictive way of looking at things) or offer any kind of financial services.

On the other hand, Vanguard ESG Global All Cap ticks all the boxes when it comes to my religious values. It doesn't contain tobacco, alcohol, gambling, or adult entertainment. To be precise, companies like Amazon included in Vanguard ETF offer tobacco and alcohol, but it comes as a small portion of their overall revenue. When it comes to debt, my view is that Islam forbids usury, not interest, so I am fine with it. I also don't mind if a company produces pork or music.

As noted earlier, this new ETF also offers higher diversity through a much higher number of holdings, exposure to small-cap and emerging markets. A welcome bonus is that it doesn't contain fossil fuels, which is another area I would like to avoid.

Although it is 'only' Sharia-light, this is the ETF I have been waiting for.
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Re: Vanguard ESG Global All Cap UCITS ETF

Post by TedSwippet »

MrCurious wrote: Wed Apr 14, 2021 8:30 am It's important to note that there isn't a single set of Sharia rules. There are numerous legal schools with differing opinions.
...
Although it is 'only' Sharia-light, this is the ETF I have been waiting for.
Thank you for the note. My sense is that this is an area with many shades of grey to it. Maybe a continuum through SRI and ESG to full Shariah? In that order? (And heck, even the Anglicised spelling of Sharia(h) appears uncertain. :-) ) Also potentially a sensitive area, which may be why nobody has so far ventured to create a wiki article on it.

Still, maybe it's time to see if something is possible. First step would I think be to move this discussion to a thread of its own, so I'll start there. I'm also aware that while this is perhaps mostly a non-US investing problem, it is not exclusively non-US.

I wonder if I have finally stepped into waters that are deeper than I am. :-|
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Re: [Wiki: Shariah-compliant investing]

Post by LadyGeek »

At TedSwippet's request, I have split this discussion into a new thread.

Shariah-compliant investing is also discussed in the US personal investments forum. Here's a quick search result: shariah
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Re: [Wiki: Shariah-compliant investing]

Post by TedSwippet »

Starting things off, then ...

This, as it turns out, looks like a rather complex and perhaps even slightly unstable area to outline. So I plan little beyond a one or two paragraph summary of the headline restrictions, distilled out of the main wikipedia article, followed swiftly by how one might implement an efficient index tracking investment strategy around these restrictions.

Open questions:
  • What is the relationship between SRI, ESG, and Shariah? My feeling currently is of a spectrum, with full Shariah at one end. Where do the other two lie, and in what order? Are there any other investment groupings on this spectrum, for example 'impact investing'?
  • Shariah's definition seems vague enough to be open to some interpretation. Additionally, a person might also decide for themselves to be more or less strict with it. Is it possible for individual investors to determine where on this spectrum they might land? If yes, what criteria might they use?
  • What acceptable funds currently exist, and where on the spectrum do they lie? Could a list of such funds somehow be arranged in order of increasing Shariah-ness? Just UCITS funds for now (though I think that in future any article should to cover US ETFs for US based investors also).
  • Is any fund not marked as Shariah (or ESG, or SRI) automatically unacceptable? Or might some (perhaps niche) funds or ETFs meet the requirements even though not marketed as compliant? If yes, how could an individual investor tell which are okay and which are not?
  • Is there a preferred spelling of Sharia(h)?
That should do for now. :-) Thanks for any responses.
Last edited by TedSwippet on Thu Apr 15, 2021 10:00 am, edited 1 time in total.
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Re: [Wiki: Shariah-compliant investing]

Post by MrCurious »

justETF has a helpful overview of various ESG indexes where X stands for excluded sectors:

Image

Alcohol and pornography are typical deal-breakers, as they are included in what would otherwise be acceptable indexes for me.

Based on this list, only Dow Jones Sustainability ex Alcohol, Tobacco, Gambling, and others and MSCI SRI would tick all the boxes (no alcohol, gambling, or pornography). FTSE Global All Cap Choice Index is not included in the table, but would also be ok.

If we take a look at iShares range of sustainable ETFs, ESG and ESG Enhanced still contain alcohol, while SRI would be ok.

Personally, I would like to avoid tobacco and weapons as well, but these are not universally banned by Sharia. There are numerous discussions among Islamic scholars on whether these two should be forbidden or not.

Having said that, while these indexes are perfectly acceptable to me ('Sharia-lite'), other Muslims might find them problematic. They might insist on the further exclusion of any companies which provide financial services (and thus interest), companies that sell pork, or companies that carry too much debt. MSCI Islamic Index claims to screen all of those.
The methodology for the MSCI Global Islamic Indexes follow Sharia investment principles and does not allow investment in
companies that are directly active in, or derive more than 5% of their revenues from such business activities as alcohol, tobacco,
pork-related products, conventional financial services, defense/weapons, gambling, or adult entertainment.

In addition, the MSCI Global Islamic Indexes do not allow investment in companies deriving significant income from interest or
companies that have excessive leverage. MSCI uses three financial ratios to screen for such companies: 1) total debt over total
assets; 2) the sum of a company's cash and interest-bearing securities over total assets; and 3) the sum of a company’s accounts
receivables and cash over total assets. None of these financial ratios may exceed 33.33%.

Finally, if a company derives part of its total income from interest income and/or from prohibited activities, Sharia investment
principles state that this proportion must be deducted from the dividends paid out to shareholders and given to charity. MSCI
therefore applies a dividend adjustment factor to all reinvested dividends.
When it comes to spelling, I would follow English Wikipedia and opt for Sharia.

As for niche ETFs that are Sharia-compliant, there are a lot of sector-specific funds which should be ok. Clean Energy, Water, Semiconductors...

There is an interesting NY Times article about this:
https://www.nytimes.com/2017/06/30/your ... m-way.html
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Re: [Wiki: Sharia-compliant investing]

Post by LadyGeek »

MrCurious wrote: Thu Apr 15, 2021 7:04 am When it comes to spelling, I would follow English Wikipedia and opt for Sharia.
Thank you. Further checking via Google suggests this is the correct spelling in English.

I have corrected the spelling in the thread title.
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Re: [Wiki: Shariah-compliant investing]

Post by TedSwippet »

MrCurious wrote: Thu Apr 15, 2021 7:04 am justETF has a helpful overview of various ESG indexes where X stands for excluded sectors: ...
Thank you for this. It is extremely helpful and illuminating.

Would I be right in suggesting that an investor could use this to pick their own personal 'flavour' of Sharia-lite here? That is, decide which of these industry areas are personal deal-breakers, and then choose from indexes that specifically exclude at least those ones? In a sense, I suppose that is the sort of decision most SRI/ESG investors would go through anyway; just wondering if the Sharia element adds much in the way of extra complexity, or not really.

In practical terms, it would be ideal to have this table inside any wiki page we create, rather than (or rather, as well as) referencing the JustETF page, because it seems to very much define the entire area. However, I am unsure of the copyright or plagiarism status of doing this (LadyGeek, thoughts or advice?).
MrCurious wrote: Thu Apr 15, 2021 7:04 am Personally, I would like to avoid tobacco and weapons as well, but these are not universally banned by Sharia. There are numerous discussions among Islamic scholars on whether these two should be forbidden or not.
I'm certainly picking up on the fact that some of this is open to interpretation, not all interpretations agree, and that there may be no definitive 'right' answer. Which is probably why Sharia and SRI/ESG can overlap. The subjective nature of some of it makes things a bit hard to pin down, but then that's true of a fair few things in all investing anyway.

Can haram travel 'upstream'? That is, if alcohol is unacceptable, is investment in a conglomerate company that owns a small brewery, perhaps under 5% of its total operations also unacceptable? A bank that lends to a brewery or distillery? A bottle maker that supplies a brewery? A company that makes an alcohol-based hand sanitiser?
MrCurious wrote: Thu Apr 15, 2021 7:04 am When it comes to spelling, I would follow English Wikipedia and opt for Sharia.
Will do. As noted by LadyGeek, a quick Google just now indicates around 20m hits for Sharia and 4m for Shariah, so I could have saved asking that question. Sorry.
MrCurious wrote: Thu Apr 15, 2021 7:04 am As for niche ETFs that are Sharia-compliant, there are a lot of sector-specific funds which should be ok. Clean Energy, Water, Semiconductors...
Is it possible or desirable to list them, or are there too many, or too difficult or time-consuming to identify; no simple JustETF search, for example? If we can't/won't list the ETFs, can we easily list the industry areas in which they can be found?

Sorry if any of the above are questions that are too big to readily answer (if they are, just gloss over them!). Again, I'm just trying to get a feel for an area of investing that I have never thought about before, in the hope of making a reasonable job of writing a wiki page covering it.
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Re: [Wiki: Shariah-compliant investing]

Post by MrCurious »

TedSwippet wrote: Thu Apr 15, 2021 10:50 am Would I be right in suggesting that an investor could use this to pick their own personal 'flavour' of Sharia-lite here? That is, decide which of these industry areas are personal deal-breakers, and then choose from indexes that specifically exclude at least those ones? In a sense, I suppose that is the sort of decision most SRI/ESG investors would go through anyway; just wondering if the Sharia element adds much in the way of extra complexity, or not really.
I think all Muslims will agree that alcohol, gambling, and adult entertainment are a no-go.
When it comes to other areas such as interest, it would probably be a matter of personal preference.

It reminds me of ESG investing. I am personally strongly pro-environment and against fossil fuels, but I don't oppose nuclear energy because I don't consider it harmful. The same goes for GMO.
TedSwippet wrote: Thu Apr 15, 2021 10:50 am Can haram travel 'upstream'? That is, if alcohol is unacceptable, is investment in a conglomerate company that owns a small brewery, perhaps under 5% of its total operations also unacceptable? A bank that lends to a brewery or distillery? A bottle maker that supplies a brewery? A company that makes an alcohol-based hand sanitiser?
Alcohol-based sanitizers wouldn't be an issue. Alcohol per se is not considered bad, just its potential negative effects in case of overindulgence.

5% threshold seems somewhat arbitrary, but because it is used by MSCI and vetted by Islamic scholars, it should be fine.

When it comes to connected businesses (traveling upstream), I believe that it shouldn't be a problem to invest in them.
TedSwippet wrote: Thu Apr 15, 2021 10:50 am Is it possible or desirable to list them, or are there too many, or too difficult or time-consuming to identify; no simple JustETF search, for example? If we can't/won't list the ETFs, can we easily list the industry areas in which they can be found?
Most industrial areas are allowed to invest in.

I would rather propose to list those areas which are certainly forbidden (alcohol, gambling, WMD, adult entertainment), probably forbidden (tobacco, pork, cloning, WMD, payday lending) and might be forbidden in case of conservative interpretation (all financial services, music and video entertainment, hotels and retail that don't separate their alcohol operations, etc).

This article lists certain industries which are prohibited for Muslims, according to the belief of the author.
While I don't necessarily agree with the definition, it can be used as a starting point.

This article about Islamic investing in hotels illustrates the complexity of the issue.

There is another practical concern when it comes to vetting sector ETFs. Let's assume that one considers cloning as forbidden by Islam. That would make it difficult to buy a biotech ETF because we can't know for sure if one of the companies is involved in cloning.

A similar case could be made for companies that carry too much debt. They could taint an otherwise allowed sector such as water or clean energy.
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Re: [Wiki: Shariah-compliant investing]

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TedSwippet wrote: Thu Apr 15, 2021 10:50 am
MrCurious wrote: Thu Apr 15, 2021 7:04 am justETF has a helpful overview of various ESG indexes where X stands for excluded sectors: ...
Thank you for this. It is extremely helpful and illuminating.

Would I be right in suggesting that an investor could use this to pick their own personal 'flavour' of Sharia-lite here? That is, decide which of these industry areas are personal deal-breakers, and then choose from indexes that specifically exclude at least those ones? In a sense, I suppose that is the sort of decision most SRI/ESG investors would go through anyway; just wondering if the Sharia element adds much in the way of extra complexity, or not really.

In practical terms, it would be ideal to have this table inside any wiki page we create, rather than (or rather, as well as) referencing the JustETF page, because it seems to very much define the entire area. However, I am unsure of the copyright or plagiarism status of doing this (LadyGeek, thoughts or advice?).
Sorry, that article is copyrighted.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Okay. I think what works here is a new "SRI, ESG and Sharia investing for non-US investors" wiki page.

The overlap in these areas is considerable, with Sharia effectively a subset of the others, and nothing currently exists on the non-US side for any of them. Outside of non-US there is this SRI page, but repurposing it would be too messy. I know nothing about how Sharia would operate for US investors, so best to keep this out of things for now. And the general rule that non-US investors should avoid US domiciled ETFs and the other way around also argues for complete separation.

Ordinarily, wiki prefers that page names spell out acronyms, but "Socially Responsible Investing, Environmental, Social, and Governance investing, and Sharia investing for non-US investors" seems far too much of a mouthful.

I think I have enough to make a start, then. I'll post again when there's a usable draft in place.
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Re: [Wiki: Sharia-compliant investing]

Post by LadyGeek »

We can put shortcuts in the wiki's search box so typing "Sharia" or "ESG" will go to that page. (SRI is the first word and will always show in the search box.)
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Re: [Wiki: Sharia-compliant investing]

Post by assyadh »

I stumbled upon this research doc which helps explains the similarities between ESG and Shariah investments: https://www.maybank.com/iwov-resources/ ... invest.PDF
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Re: [Wiki: Sharia-compliant investing]

Post by occambogle »

Just to say it’s a really fascinating discussion.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

Looking at ESG's top 10 holdibgs, Chase/ Visa/ Disney would be deal breakers for me a Sharia complaint client. Chase/ Visa due to usury and Disney due to their involvement in porn. Yes you read that right. I have opted for HLAL and a little bit SPUS. If anyone has come across any alternarives, I would appreciate if they can share them with me.
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Re: [Wiki: Sharia-compliant investing]

Post by finite_difference »

Is the idea to be completely against debt of all kind or just unscrupulous debt?

There are a lot of unscrupulous companies out there that take advantage of the poor by charging high interest rates.

The Great Recession was caused by unscrupulous mortgage lending (selling houses regardless of whether the owner could afford it).

The latest craze in unscrupulous lending (100%+ interest) is so called Title Loans:

https://dealbook.nytimes.com/2014/12/25 ... borrowers/

Arguably credit card companies that charge 10-30% interest are also unscrupulous as well, though some are better than others in that you can renegotiate to something more reasonable.

The longer you go into the past the more I would expect loans to resemble “Title Loans” and less resemble good debt like a “30-year fixed interest mortgage”.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

finite_difference wrote: Sat Apr 24, 2021 10:41 am Is the idea to be completely against debt of all kind or just unscrupulous debt?

There are a lot of unscrupulous companies out there that take advantage of the poor by charging high interest rates.

The Great Recession was caused by unscrupulous mortgage lending (selling houses regardless of whether the owner could afford it).

The latest craze in unscrupulous lending (100%+ interest) is so called Title Loans:

https://dealbook.nytimes.com/2014/12/25 ... borrowers/

Arguably credit card companies that charge 10-30% interest are also unscrupulous as well, though some are better than others in that you can renegotiate to something more reasonable.

The longer you go into the past the more I would expect loans to resemble “Title Loans” and less resemble good debt like a “30-year fixed interest mortgage”.
Generally anything that invloves interest is to be avoided. Simply making money from money without an investment or risk is how the wealthy have historically oppressed the less fortunate. This continues to be true today. Interest also encourages hoarding of wealth vs fair investment in a market with associated risks/ rewards and promotes systematic oppression of the borrower. One, therefore, is also discouraged/ prohibited from becoming the borrower if she/ he can help it as that would only streghten the system. Engaging in usurus transacrions is considered a major violation in Islam and is therefore not taken lightly by practicing Muslims.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

The first draft non-US Sharia investing article is now here:

User:TedSwippet/Sharia investing for non-US investors - Bogleheads

Not a long article. The number of Sharia-compliant ETFs available to non-US investors currently seems depressingly low, and worse, some may be hard to access.

Anyway, comments, corrections, additions, updates or edits welcome.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

TedSwippet wrote: Mon Apr 26, 2021 4:30 am The first draft non-US Sharia investing article is now here:

User:TedSwippet/Sharia investing for non-US investors - Bogleheads

Not a long article. The number of Sharia-compliant ETFs available to non-US investors currently seems depressingly low, and worse, some may be hard to access.

Anyway, comments, corrections, additions, updates or edits welcome.
SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.These should be on the list in Wiki.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Keenobserver wrote: Mon Apr 26, 2021 7:02 am SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.These should be on the list in Wiki.
Thanks. However, this page is written specifically for non-US investors. The ETFs you mention are US domiciled, meaning that they are likely to be significant US tax traps for nearly all non-US investors. The default is 30% US tax on all dividends, and the risk of 26-40% US estate tax on the balance above $60k.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

TedSwippet wrote: Mon Apr 26, 2021 8:58 am
Keenobserver wrote: Mon Apr 26, 2021 7:02 am SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.These should be on the list in Wiki.
Thanks. However, this page is written specifically for non-US investors. The ETFs you mention are US domiciled, meaning that they are likely to be significant US tax traps for nearly all non-US investors. The default is 30% US tax on all dividends, and the risk of 26-40% US estate tax on the balance above $60k.
Thanks. Sorry didnt see the Big Bold descrption thst says non us
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Keenobserver wrote: Mon Apr 26, 2021 9:03 am Thanks. Sorry didnt see the Big Bold descrption thst says non us
No worries. Do you think there may be a case for a companion and more US-specific Sharia investing page?

Alternatively, the current page could list US domiciled options, although prefixed with the massive warning that they come with a heap of US tax baggage that nearly all non-US investors would do well to avoid. Any thoughts?
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Re: [Wiki: Sharia-compliant investing]

Post by LadyGeek »

Keenobserver makes a good point. From what I remember about the US Sharia investing threads, Amana was mentioned in a great many of them. Not having Amana in the wiki might be an oversight.

Would it make sense to have a separate section in this page for US investors? IOW, a section as "For US investors". If there's not enough material to make a new page, that would work.

We could create a wiki shortcut so the section appears in the search box.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

LadyGeek wrote: Mon Apr 26, 2021 10:55 am Would it make sense to have a separate section in this page for US investors? IOW, a section as "For US investors". If there's not enough material to make a new page, that would work.
I think separate pages is likely to be cleaner and clearer. Any common part is tiny relative to the fund recommendations and tax explanations. If combined into one page then for any given reader, nearly half the page will be not just irrelevant but (thanks to painful US tax rules) positively harmful if accidentally followed. Given this, it seems best to keep them entirely separated.
Keenobserver wrote: Mon Apr 26, 2021 7:02 am SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.
So, US domiciled Sharia ETFs? HLAL, SPUS and IMAN already mentioned upthread (thanks).

Are there any others I should list? Or readily available mutual funds? I've googled around a bit, and the fully Sharia-compliant options look around as thin on the ground for US investors as for the rest of us. Only the three I've just listed showed up, but maybe I missed some. A search from the UK won't always show up everything available to the US.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

TedSwippet wrote: Mon Apr 26, 2021 3:16 pm
LadyGeek wrote: Mon Apr 26, 2021 10:55 am Would it make sense to have a separate section in this page for US investors? IOW, a section as "For US investors". If there's not enough material to make a new page, that would work.
I think separate pages is likely to be cleaner and clearer. Any common part is tiny relative to the fund recommendations and tax explanations. If combined into one page then for any given reader, nearly half the page will be not just irrelevant but (thanks to painful US tax rules) positively harmful if accidentally followed. Given this, it seems best to keep them entirely separated.
Keenobserver wrote: Mon Apr 26, 2021 7:02 am SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.
So, US domiciled Sharia ETFs? HLAL, SPUS and IMAN already mentioned upthread (thanks).

Are there any others I should list? Or readily available mutual funds? I've googled around a bit, and the fully Sharia-compliant options look around as thin on the ground for US investors as for the rest of us. Only the three I've just listed showed up, but maybe I missed some. A search from the UK won't always show up everything available to the US.
Yes and Amagx/ Amanx come under Amana/ Saturna. Amana also offers Amapx/ Amipx which are Sukuk based non- equity investments for capital preservation. A sharia compliant alternative to bonds i suppose. I am.not.sure how sharia complaint this actually is. Having spoken to the folks at HLAL, they are planning to launch sharia complaint REITs in the near future. There is also the Azzad Wise capital fund WISEX which is a fixed income fund, Azzad ethical fubd ADJEX which is a growth oriented mid cap fund. Again, there might be some disagreement as to how sharia complaint these funds are, especially the fixed income ones. Sharia oriented investing options have grown within the last 2 years or so, and it seems more options will be on the horizon. I have held Amgx/ Amanx, HLAL, and SPUS. I sold out of Amana and switched to HLAL due to higher fees and HLAL is more user friendly; have their own user friendly app.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Keenobserver wrote: Tue Apr 27, 2021 10:17 am Yes and Amagx/ Amanx come under Amana/ Saturna. Amana also offers Amapx/ Amipx which are Sukuk based non- equity investments for capital preservation. A sharia compliant alternative to bonds i suppose. I am.not.sure how sharia complaint this actually is.
Thanks. I also turned up SPRE and SPSK ETFs. Any opinion on these?
Keenobserver wrote: Tue Apr 27, 2021 10:17 am Having spoken to the folks at HLAL, they are planning to launch sharia complaint REITs in the near future. There is also the Azzad Wise capital fund WISEX which is a fixed income fund, Azzad ethical fubd ADJEX which is a growth oriented mid cap fund. Again, there might be some disagreement as to how sharia complaint these funds are, especially the fixed income ones.
It does appear to be a bit "in the eye of the beholder" at times, doesn't it? Anyway, I think I have enough material now to put together a reasonable stab at a Sharia investing for US investors page. Thanks again for the help. I'll post here when I have a draft.

As an aside, one interesting (to me) aspect of this is that the breadth and number of Sharia options for US investors is around the same as for non-US investors, if not slightly more, yet given that non-US investors need to avoid US domiciled funds due to hostile US tax laws, the market for US domiciled Sharia funds should be far smaller. Wikipedia estimates around 3.5m Muslims live in the US, compared to around 1.8bn outside. That seems to argue for many more non-US options than seem to exist. Shrug.
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Re: [Wiki: Sharia-compliant investing]

Post by Keenobserver »

TedSwippet wrote: Tue Apr 27, 2021 12:31 pm
Keenobserver wrote: Tue Apr 27, 2021 10:17 am Yes and Amagx/ Amanx come under Amana/ Saturna. Amana also offers Amapx/ Amipx which are Sukuk based non- equity investments for capital preservation. A sharia compliant alternative to bonds i suppose. I am.not.sure how sharia complaint this actually is.
Thanks. I also turned up SPRE and SPSK ETFs. Any opinion on these?
Keenobserver wrote: Tue Apr 27, 2021 10:17 am Having spoken to the folks at HLAL, they are planning to launch sharia complaint REITs in the near future. There is also the Azzad Wise capital fund WISEX which is a fixed income fund, Azzad ethical fubd ADJEX which is a growth oriented mid cap fund. Again, there might be some disagreement as to how sharia complaint these funds are, especially the fixed income ones.
It does appear to be a bit "in the eye of the beholder" at times, doesn't it? Anyway, I think I have enough material now to put together a reasonable stab at a Sharia investing for US investors page. Thanks again for the help. I'll post here when I have a draft.

As an aside, one interesting (to me) aspect of this is that the breadth and number of Sharia options for US investors is around the same as for non-US investors, if not slightly more, yet given that non-US investors need to avoid US domiciled funds due to hostile US tax laws, the market for US domiciled Sharia funds should be far smaller. Wikipedia estimates around 3.5m Muslims live in the US, compared to around 1.8bn outside. That seems to argue for many more non-US options than seem to exist. Shrug.
You are welcome. Im not familair with SPRE, looks like it just opened Dec 2020. Thanks for sharing. I will have a look. As for there being more options in US, I think there is a general stereotype in much of the Muslim world vs stocks/ stock market as it is something untangible. There is historic precedence of banks breaking and governtments seizing people' s assests and money disappearing overnight. Im generalizing, but corrupt governements and institutions have not helped. People across the Muslim world prefer to invest in tangible assests/ materials and are quite wary of stock market or untangible investments in general. They prefer to invest in Gold, land, commodities, and physical real estate. There is also a general view that much of the stock market is haram ( in violation of Islamic tenets) and therefore not allowed. Modern finace' s close relarionship with interest/ usury and Islam' s strict limitations on engaging in usurs transactions might be at heart of the general concensus. US offers stability, security, and rule of law that maybe no other country can match, hence much of the world' s wealth ends up here. Thus Muslims in the US are generally much more willing to in invest in the market than outside.
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Keenobserver wrote: Mon Apr 26, 2021 7:02 am SPUS and HLAL are 2 sharia compliant ETfs..Amana are Sharia compliant mutual funds( Amanx/ Amagx) IMAN is also a sharia compliant mutual fund.These should be on the list in Wiki.
I have created a draft of a new page specifically aimed at US Sharia investors:

User:TedSwippet/Sharia investing for US investors - Bogleheads

As ever, comments, corrections or additions welcomed before moving this to main. I'm neither a US investor nor a Sharia one, so this has been new territory for me.

Comments also solicited in this US forum thread: [Wiki] Sharia compliant investing - new draft article
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Silence implies consensus, albeit perhaps rather weak.

Anyway, it's been long enough now, so I am moving both the non-US and the US Sharia investing pages to main. Of course, edits in wiki main are still perfectly possible, if further suggestions arise in future.
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Re: [Wiki: Sharia-compliant investing]

Post by Ahmadelnaggar »

Thanks a lot for the effort on this Wiki. Small correction though, I believe you switched the Distributing vs. Accumulating versions of the Vanguard ESG Global All Cap UCITS ETF
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Re: [Wiki: Sharia-compliant investing]

Post by TedSwippet »

Ahmadelnaggar wrote: Thu May 20, 2021 1:02 pm Thanks a lot for the effort on this Wiki. Small correction though, I believe you switched the Distributing vs. Accumulating versions of the Vanguard ESG Global All Cap UCITS ETF
You're right. Thank you for picking this up. Fixed. And welcome to the forum.
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