Halal Investing USA 2026

Halal investing is a two-stage screening process that evaluates both what a company does and how it finances itself. Every investment in a halal portfolio must pass both stages — a company cannot be "mostly halal" or offset prohibited activities with strong performance in other areas.

Stage 1: Business Activity Screen

Remove companies whose primary business involves prohibited industries. The AAOIFI standard (Sharia Standard 21) applies a 5% revenue tolerance — a company is excluded if more than 5% of its revenue comes from prohibited activities:

• Conventional banking and insurance: Primary income is interest (riba) — the core prohibition. This eliminates JPMorgan, Bank of America, Wells Fargo, Goldman Sachs, and the entire financial sector from halal portfolios.
• Alcohol: Production, distribution, and retail — Constellation Brands, Brown-Forman, Molson Coors excluded.
• Tobacco: Manufacturing and distribution — Altria, Philip Morris excluded.
• Gambling: All forms — MGM Resorts, DraftKings, Caesars excluded.
• Weapons manufacturing: Varies by methodology — most screen out companies with significant lethal weapons revenue.
• Adult entertainment and pork processing.

Stage 2: Financial Ratio Screen

Even after removing prohibited business categories, remaining companies must pass three quantitative tests to ensure they are not excessively debt-financed or interest-income dependent:

• Interest-bearing debt / Total assets: under 33% — prevents investing in highly leveraged companies whose returns depend substantially on borrowed money
• Interest income / Total revenue: under 5% — excludes companies that earn significant income from cash parked in interest-bearing accounts
• Cash + receivables / Total assets: under 50% — prevents investing in companies that are essentially financial instruments disguised as operating businesses

This section is updated quarterly to provide current performance data for every major halal ETF available to US investors. Last updated: May 2026 (Q2 2026 data through May 15).

Q1 2026 Performance: Halal ETFs vs Benchmarks

What Drove Q1 2026 Performance

Why SPUS and HLAL outperformed SPY in Q1: Two forces worked in halal ETFs' favor simultaneously. First, conventional financial stocks — excluded from all halal ETFs — underperformed the broader market in Q1 as regional bank concerns resurfaced and net interest margins compressed. Second, semiconductor and AI-adjacent technology companies (which pass Sharia screening due to low debt and no prohibited revenue) led market performance, driven by Nvidia, Broadcom, and AMD. The Sharia screen's structural tilt away from financials and toward technology played perfectly in Q1.

Why UMMA underperformed: UMMA's actively managed global mandate includes international markets that lagged US equities in Q1. The fund's European and emerging market exposure dragged relative performance vs the US-only SPUS and HLAL. UMMA's role in a halal portfolio is international diversification, not US equity performance — judge it against global benchmarks, not SPY.

Why AMAL returned +2.8%: Sukuk (Islamic bonds) are less volatile than equities and function as the portfolio's stabilizing component. The +2.8% Q1 return on AMAL represents approximately 3.5–4.0% annualized yield, reflecting the fund's distribution yield from underlying sukuk rental income. As the Fed signals possible rate cuts in H2 2026, AMAL's longer-duration sukuk positions are positioned to benefit from rate-driven price appreciation.

Notable Q1 2026 Rebalancing Changes

Every halal ETF rebalances quarterly. Key changes at the Q1 2026 rebalancing that investors should know:

• SPUS: Increased weight in Nvidia (NVDA) and Broadcom (AVGO) following their index weight increases in the underlying S&P 500 Sharia Index. Two mid-cap financial companies removed after their debt ratios exceeded the 33% threshold due to Q4 2025 debt issuance.
• HLAL: Added three new technology companies that passed the FTSE Shariah screening update. Removed one consumer staples company whose recent acquisition added significant conventional financial subsidiaries, pushing its business activity screen into prohibited territory.
• AMAL: Extended duration slightly — increased allocation to 5-year sukuk from 7% to 12% of portfolio in anticipation of Fed rate cuts. This adds price appreciation potential if cuts materialize.
• SPRE: Added two industrial REITs (warehouse/logistics) and reduced retail REIT exposure. Industrial REITs have stronger cash flows and lower vacancy risk in 2026 economic environment.

Q2 2026 Outlook

Through May 15 2026, all halal equity ETFs are tracking above the conventional S&P 500 on a YTD basis. The macro environment for the remainder of Q2 is characterized by: (1) potential Fed rate cuts (favorable for AMAL sukuk; neutral for SPUS/HLAL); (2) continued AI/technology investment cycle (favorable for SPUS/HLAL due to heavy tech weight); (3) geopolitical uncertainty supporting gold (neutral for halal ETFs, positive for SDIRA physical gold positions).

Purification is one of the most widely ignored requirements in halal investing — and ignoring it invalidates the entire Sharia compliance of an otherwise compliant portfolio. Here is exactly what it is and how to calculate it.

What Purification Is

Even Sharia-screened companies earn small amounts of prohibited income — interest on their cash reserves, minor revenue from non-compliant subsidiaries. The 5% revenue tolerance means they pass screening, but the investor still participates in a small amount of prohibited income. Purification means calculating that prohibited proportion of your investment returns and donating it to charity, "purifying" the remainder.

How to Calculate Your Annual Purification Amount

The simplest approach for ETF investors:

1. Find your ETF provider's published annual purification amount per share
2. Multiply by your average share count during the year
3. Donate that amount to any charity

For individual stocks, Zoya calculates your purification amount automatically based on each company's prohibited income ratio applied to your realized gains and dividends. The Islamicly app does the same. If you have 20 stocks in your portfolio, manually calculating purification is impractical — use one of these apps.

For Wahed Invest managed accounts, Wahed calculates and reports your annual purification amount in your year-end statement.

What to Do With the Purification Amount

Donate it to any charity. There is no requirement that the charity be Islamic or that you announce it. The purpose is to remove the prohibited portion from your wealth. Many investors add their purification amount to their annual zakat calculation or donate it to a charity they support anyway. Use our Zakat Calculator to manage both obligations in one calculation.

These are every Sharia-compliant ETF available to US retail investors as of Q2 2026. For the dedicated performance section with quarterly returns, see the Q1–Q2 2026 Performance Update above.

The Simple Portfolio Using These Five ETFs

For an investor who wants full halal coverage across all asset classes:

• 60% SPUS — US equity core; largest, most liquid, best rates
• 15% AMAL — Sukuk for stability; the halal bond replacement
• 10% UMMA — International equity diversification
• 10% SPRE — Real estate income and inflation protection
• 5% HLAL — Additional US equity with different methodology

This five-fund portfolio is diversified across US equities, international equities, real estate, and sukuk — without a single dollar in interest-bearing bonds or prohibited companies. Rebalance annually.

Most halal investors eventually face the same question: SPUS or HLAL as their core US equity holding? Here is the complete answer.

The verdict: SPUS for most investors — larger, more liquid, marginally cheaper, and has outperformed HLAL over most recent periods. HLAL as a secondary holding for investors who want broader mid-cap exposure or want to diversify across two Sharia screening methodologies. Never necessary to hold both; beneficial for investors with $50,000+ in the halal ETF allocation.

ETFs are the most practical halal investing vehicle for most investors. But if you want to hold individual companies, you need a screening method. Here is the complete approach.

The Two Screening Apps You Need

Current Screening Status — Major US Stocks (May 2026)

Screening status current as of May 2026. Status can change at quarterly rebalancing as financial ratios update. Always verify current status in Zoya before buying.

For investors who want a fully managed halal portfolio without selecting individual ETFs or stocks, halal robo-advisors handle asset allocation, rebalancing, and compliance monitoring automatically.

For most investors, building a self-managed portfolio of SPUS + AMAL at Fidelity (0.49% + 0.88% blended to approximately 0.55%) is cheaper than Wahed's 0.29% advisory fee on top of fund expenses. Wahed's value is in automation and the IRA wrapper — ideal for investors who will not or cannot manage their own allocation.

The most powerful halal retirement vehicle for most American Muslims is a Roth IRA at Fidelity invested in SPUS. Here is the complete strategy.

Priority Order for Halal Retirement Savings

1. Check your 401k for a self-directed brokerage window. If it has one, you can hold SPUS inside your 401k and capture your full employer match with halal investments. Ask HR: "Does our 401k have a brokerage window or BrokerageLink option?"
2. Maximize your Roth IRA ($7,000/year, $8,000 if 50+). Open at Fidelity. Invest in SPUS as your primary holding. All growth is permanently tax-free.
3. Contribute to your 401k only up to the employer match if no brokerage window exists. Select the ESG or least-problematic equity fund available. Avoid all bond funds entirely.
4. If self-employed: open a Solo 401k at Fidelity. Contribution limit $69,000/year ($76,500 age 50+). Complete investment freedom. This is the most powerful halal retirement vehicle available.

2026 Roth IRA Contribution Limits

For the complete 401k and retirement account strategy — including the darurah framework, self-directed IRA for real estate and gold, and the employer negotiation playbook — read our Halal Retirement Planning guide and Ethical 401k Alternatives guide.

The Annual Halal Portfolio Maintenance Checklist

• January: Calculate and donate annual purification amount from prior year (check ETF annual reports)
• April: Maximize prior-year Roth IRA contribution (deadline April 15)
• Q1/Q2/Q3/Q4: Check this guide's quarterly performance update (updated first week of each quarter)
• December: Maximize current-year 401k contribution before year-end cutoff
• Ramadan: Calculate and pay annual zakat using our Zakat Calculator
• Annually: Rebalance portfolio to target allocation; review if any individual stocks have changed Sharia status