Is the S&P 500 Halal? What Muslim Investors Need to Know

The Quick Answer

Investing directly in the S&P 500 index (through SPY or VOO) is not fully halal — the index includes companies that violate Sharia principles. However, a significant portion of the S&P 500 (estimated 65-70%) does pass Sharia screening, and there are excellent halal alternatives that give you S&P 500-like exposure with the haram companies removed.

What Is the S&P 500?

The S&P 500 is an index of 500 of the largest publicly traded US companies, weighted by market capitalization. It includes Apple, Microsoft, Amazon, NVIDIA, Google, Meta, Tesla — and also JPMorgan Chase, Bank of America, Visa, Mastercard, Philip Morris, Anheuser-Busch, Lockheed Martin, and hundreds of others.

When you buy an S&P 500 index fund like SPY or VOO, you're buying fractional shares of all 500 companies simultaneously. This means you automatically own pieces of banks that charge interest, alcohol producers, gambling companies, weapons manufacturers, and entertainment companies with adult content.

Which S&P 500 Companies Fail Sharia Screening?

Companies are excluded from Islamic indices for two main reasons: sector exclusions (haram business) and financial screens (too much interest-based debt or income).

Sector Exclusions (Always Excluded)

• Banks and conventional financial institutions: JPMorgan, Bank of America, Wells Fargo, Citigroup, Goldman Sachs — their entire business model is interest-based
• Alcohol companies: Constellation Brands, Molson Coors
• Tobacco: Philip Morris International, Altria
• Defense/Weapons: Lockheed Martin, Raytheon, Northrop Grumman, General Dynamics
• Gambling: MGM Resorts, Caesars Entertainment, Penn Entertainment
• Adult entertainment: Excluded where applicable
• Pork processing: Companies whose primary business involves pork

Financial Screen Failures

Many otherwise permissible companies fail because their debt ratio exceeds 33% of market cap, or their interest income exceeds 5% of revenue. Insurance companies, for instance, fail on both accounts.

How Much of the S&P 500 Is Halal?

Estimates vary by screening methodology, but generally:

• Approximately 65-70% of S&P 500 companies pass Sharia screening
• By market cap, roughly 70-75% passes (tech giants like Apple, Microsoft, NVIDIA, Google all pass)
• By number of companies, about 320-350 out of 500 are Sharia-compliant

The financial sector (banks, insurance companies) represents about 12% of the S&P 500 by market cap — this entire sector fails. Energy companies (some pass, some fail), defense contractors, alcohol, and tobacco make up another 5-8%.

The Best Halal Alternatives to the S&P 500

1. SPUS — SP Funds S&P 500 Sharia ETF

SPUS tracks a Sharia-screened version of the S&P 500. It holds all S&P 500 companies that pass the Sharia screen, weighted by market cap. This is the closest thing to "halal S&P 500" investing available. Expense ratio: 0.49%.

2. HLAL — Wahed FTSE USA Shariah ETF

Tracks the FTSE USA Shariah Index. Broader than just S&P 500 — includes more US companies. Sharia-supervised by Wahed's scholars. Expense ratio: 0.50%.

3. ISDU — iShares MSCI USA Islamic UCITS ETF

For international investors, this tracks the MSCI USA Islamic Index. Available on European exchanges.

How SPUS vs SPY Performance Compares

You might wonder: does removing 30% of the companies hurt performance? Historically, not significantly. Because tech companies (which are mostly halal) dominate the S&P 500 by market cap, a Sharia-screened version tracks the parent index reasonably closely. In years when tech outperforms (like 2023-2024), Sharia indices actually outperform their conventional counterparts.

The years when Sharia indices underperform are years when banks and energy companies lead the market.

Purification for Sharia ETFs

Even halal ETFs like SPUS hold companies that earn small amounts of interest income. SPUS publishes an annual purification ratio — in recent years, this has been approximately 2% of dividends. You donate this percentage to charity to cleanse the income.

Bottom Line

Don't invest in the regular S&P 500 (SPY, VOO) and assume it's halal. The index contains dozens of companies with clearly impermissible businesses. Instead, choose a Sharia-screened alternative like SPUS or HLAL — you get broadly similar market exposure, lower costs, and full peace of mind.

For Muslim investors who want US equity exposure, this is the right approach. Use our checker to verify current status.