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In the Name of God بسم الله

Investing in funds/ETFs with illegitimate businesses


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Guest bababooey

I have my bank do my asset management for me. I usually approve/reject buying into funds suggested my advisor. I look at the performance, MER, holdings, fund size etc not in excruciating detail, more in a sort of general way to understand the philosophy of the fund and so on. I have explicitly instructed my advisor I want to avoid alcohol, tobacco, cannabis, gambling, weapons & defense stocks as much as possible but with funds having 100+ stocks/etfs sometimes, it becomes really hard to find one fund that doesn't have any or go through that entire list to begin with. Usually I will look at the top holdings and if I spot such a company I will immediately reject a fund but some other company with a smaller portfolio percentage eg 0.2/0.5 will probably be in that list. I assume Allah is not very bureaucratic/pedantic, but nonetheless, I am concerned about the halal-ness of the returns. Is it okay to continue investing in these funds? What if the holdings are greater than 1%/2%? I know this would be better asked to Sistani directly but usually it takes months to get a response from his office.

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  • Advanced Member

:bismillah:

فَمَنۡ يَّعۡمَلۡ مِثۡقَالَ ذَرَّةٍ خَيۡرًا يَّرَهٗ ؕ‏ 
(99:7) So, whoever does an atom's weight of good shall see it;
 
وَمَنۡ يَّعۡمَلۡ مِثۡقَالَ ذَرَّةٍ شَرًّا يَّرَهٗ
(99:8) and whoever does an atom's weight of evil shall see it.
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Up to 2007 efts were okay. Better than mutual funds.

But . . . 1) then many etfs were set up to purchase undesirable stocks. That started -as l remember reading- about 2003, after the tech-wreck was over.  2) most etfs -like hedge funds- cannot keep pace with their advertised index. l don't know how many etfs have 'gone under', yet there were 8k hedge funds back then and now there are <5k, 3) muni etfs also buy undesirables, all of which bought Puerto Rico knowing they were going to default at ~2% level.

Since 2008 l believe, the prices for stocks are no longer set by market activity but by the option price. Explanation: during the rise of the tech bubble in the 90, when there was an lPO -to use one case- the insiders would order a block-of-shares $10 or more above the market price and then another firm would order a block at a far higher price --for like two or three days. This way all firms could sell their shares into the retail market at ridiculous prices. So now, similar behavior is done with option setting.

Also, in the hunt-for-yield, bond prices are beyond good sense --or they are bad bonds. Park your stuff in treasuries. You won't lose your money there.

Don't fight the Fed. Rates are "criminally" low, triggering another real estate bubble even in a C-19 environment.

l have sold my stuff.

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