VOO is one of the most owned ETFs on the planet. Managed by Vanguard, it tracks the S&P 500 index — the 500 largest publicly traded companies in the United States. With an expense ratio of just 0.03%, it is among the cheapest investment products ever created. Warren Buffett has famously recommended it. Millions of American investors hold it as their core retirement position.

For Muslim investors in both the United States and Canada, VOO comes up constantly. It is simple, cheap, and widely recommended. But is it halal?

The answer is no — VOO is not halal in its standard form. But understanding why, and what to do instead, is what this article is about.

What Does VOO Actually Hold?

VOO tracks the S&P 500 index, which includes 500 of the largest U.S. companies weighted by market capitalization. As of 2026, the top holdings include Apple, Microsoft, Nvidia, Amazon, Alphabet (Google), Meta, Berkshire Hathaway, and JPMorgan Chase.

At first glance this looks promising — tech companies dominate the top of the list, and many of them pass Sharia screening individually. But the S&P 500 is a broad market index, which means it holds companies from every sector of the economy — including sectors that are categorically excluded under Islamic finance principles.

Why VOO Is Not Considered Halal

There are two main reasons VOO fails Sharia screening.

Problem 1 — Financial Sector Holdings

The S&P 500 includes a significant allocation to the financial sector — approximately 12-15% of the total index depending on market conditions. This includes:

• JPMorgan Chase — the largest U.S. bank by assets, whose primary business is interest-based lending
• Bank of America, Wells Fargo, Citigroup — all excluded for the same reason
• Berkshire Hathaway — Warren Buffett’s conglomerate, which owns major financial businesses including insurance companies and a large stake in Bank of America
• Goldman Sachs, Morgan Stanley — investment banking and financial services
• Visa and Mastercard — these are sometimes considered borderline, but they facilitate interest-bearing transactions at scale

Conventional banking is categorically excluded under Islamic finance because the entire business model is built on charging interest — Riba. Owning an index that includes a 12-15% allocation to conventional banks means owning a fundamentally non-compliant portfolio, regardless of how strong the tech component is.

Problem 2 — Other Prohibited Sectors

Beyond financials, the S&P 500 also includes allocations to:

• Alcohol companies — companies with significant alcohol revenue within consumer staples and other sectors
• Defense contractors and weapons manufacturers — Lockheed Martin, Raytheon Technologies, Northrop Grumman
• Tobacco companies — Altria, Philip Morris
• Casino and gambling companies — depending on the current S&P composition

None of these can be made permissible through purification. They are categorically excluded regardless of their weighting in the index.

What About the Fact That Tech Makes Up 30%+ of VOO?

This is the most common argument we hear: ‘But VOO is mostly tech now — Apple, Microsoft, Nvidia, Amazon make up over 30% of it. Doesn’t that make it mostly okay?’

The answer is no, and here is why. Owning a fund that is 30% halal tech and 70% uninvestigated (with 15% in clearly haram financials) is not the same as owning a halal fund. The fund holds the haram companies just as definitively as it holds the halal ones.

Think of it this way: if you bought a basket of mixed fruit that included some rotten pieces, you would not eat the whole basket just because most pieces were fresh. You would either remove the rotten pieces — which is exactly what a halal ETF does — or buy a basket that only contained fresh fruit.

A halal ETF removes the prohibited companies and gives you only the compliant ones. VOO does not do this.

The Halal Alternative to VOO

The good news is that there is now a direct halal equivalent to VOO. In fact, there are several.

SPUS — The Most Direct VOO Substitute

SPUS is managed by SP Funds and applies AAOIFI Sharia screening to the S&P 500 universe. It removes the prohibited companies — primarily financial stocks, defense contractors, alcohol, and tobacco — and holds the remaining compliant companies.

The result is a portfolio that looks quite similar to VOO’s top holdings, but without the haram exposure. Apple, Microsoft, Nvidia, Amazon, Alphabet, and Meta remain prominent holdings (subject to their passing Sharia screening at each quarterly review). The financials are removed.

The cost is slightly higher than VOO — 0.49% versus VOO’s 0.03% — but this is a necessary price for the screening infrastructure. And compared to most actively managed funds, 0.49% is still very low.

SPUS has grown to over $2 billion in assets under management, making it the largest halal ETF listed on U.S. exchanges. It is available at Fidelity, Charles Schwab, Robinhood, and most other U.S. brokers.

What About VTI — Vanguard Total Stock Market ETF?

Some investors ask about VTI — Vanguard’s Total Stock Market ETF, which holds virtually every publicly traded U.S. company (around 3,700 stocks). If VOO is not halal, VTI is even further from compliance. It holds every financial company, every weapons manufacturer, every tobacco and alcohol company in the U.S. market with no filtering whatsoever.

VTI has the same fundamental problem as VOO, amplified. More companies means more prohibited holdings, not fewer. The answer is the same: not halal, replace with a Sharia-screened equivalent.

Canadian Investors — A Special Note on VOO

Canadian investors sometimes hold VOO directly through their RRSP or TFSA at Questrade or Wealthsimple. Beyond the Sharia compliance issue, there are also practical reasons why a Canadian-listed equivalent may be preferable.

SPRE.TO — the Canadian-listed version of the SPUS strategy — trades in CAD on the Toronto Stock Exchange. It eliminates the need for currency conversion, which can cost 1.5-2% at most bank brokerages if not using Norbert’s Gambit. It also functions cleanly inside a TFSA without the U.S. dividend withholding tax applying in the same way.

For Canadian Muslim investors who were holding or considering VOO: SPRE.TO in your TFSA, or SPUS in your RRSP (to benefit from the Canada-U.S. tax treaty waiving the withholding tax), are the recommended replacements.

What About Performance? Is SPUS Competitive With VOO?

This is a fair and important question. The honest answer is that SPUS has underperformed VOO in some periods and outperformed it in others. The difference in long-term compound returns has been small.

The reason performance tracks closely is that the financial sector — the main thing being removed — is not the primary driver of S&P 500 returns over most long-term periods. Technology has been the dominant driver, and halal indices are effectively overweight technology relative to conventional indices. In technology bull markets, halal ETFs often outperform. In periods when financials do well, they may lag slightly.

What matters for Muslim investors is not that SPUS perfectly matches VOO — it is that SPUS gives you competitive exposure to U.S. equities without compromising your principles. The expected long-term return difference is small. The principle difference is significant.

Final Verdict

To check the current Sharia compliance status of any ETF or individual stock, use our Free Halal ETF & Stock Screener at halaletfhub.com/screener — updated regularly for both Canadian and U.S. investors.

— Rachid Fouadi, M.Sc., CPA  · 

If you are looking to invest in the US stock market while staying aligned with Islamic finance principles, you have likely come across SPUS. It is one of the most popular halal ETFs available today, often seen as the go-to option for Sharia-compliant exposure to large US companies.

But is SPUS truly a strong long-term investment, or is it simply a filtered version of the S&P 500 with limitations investors often overlook? In this complete review, we will break down how SPUS works, what it holds, its performance, risks, and whether it deserves a place in your halal portfolio.

What is SPUS ETF?

SPUS, officially known as the SP Funds S&P 500 Sharia Industry Exclusions ETF, is a US-listed ETF designed to provide exposure to large-cap American companies while following Sharia-compliant investment principles.

In simple terms, SPUS tracks a modified version of the S&P 500 but removes companies that do not meet Islamic finance guidelines.

This includes:

• Conventional banks and financial institutions
• Companies with high levels of debt
• Businesses involved in prohibited industries such as alcohol, gambling, or tobacco

The result is a portfolio that focuses heavily on growth-oriented companies, particularly in sectors like technology.

For halal investors, this offers a structured and accessible way to participate in the US equity market without compromising their values.

How SPUS Stays Sharia-Compliant

SPUS follows a multi-step screening process to ensure compliance with Islamic finance principles.

1. Industry Screening

The first step removes companies involved in non-compliant activities such as:

• Interest-based financial services
• Alcohol and tobacco
• Gambling
• Adult entertainment

This immediately eliminates a significant portion of the traditional market, especially the financial sector.

2. Financial Ratio Screening

The second step focuses on financial health. SPUS excludes companies that:

• Have excessive debt levels
• Generate significant income from interest

This is critical because Islamic investing avoids businesses that rely heavily on interest-based financing.

3. Purification Process

Even after screening, some companies may still earn a small portion of non-compliant income.

To address this, SPUS applies a purification process where a small percentage of income is identified. Investors are expected to donate this portion to maintain full compliance.

What Does SPUS Hold?

One of the most important aspects of any ETF is its underlying holdings.

Because SPUS excludes financials and other sectors, its portfolio looks quite different from the traditional S&P 500.

Top Holdings

SPUS is heavily concentrated in large technology and growth companies, including:

• Apple
• Microsoft
• Nvidia
• Amazon
• Meta
• Alphabet

These companies tend to have strong balance sheets and lower reliance on debt compared to traditional financial institutions.

Sector Allocation

The ETF has:

• High exposure to technology
• Reduced exposure to financials
• Limited diversification across certain sectors

This creates a unique profile compared to traditional index ETFs.

Performance Overview

SPUS has delivered strong performance over recent years and has even outperformed the S&P 500 during certain periods.

Source: issuer’s website

Why Has SPUS Performed Well?

The main reason is sector exposure. Because SPUS is heavily weighted toward technology and growth stocks, it has benefited from the strong performance of these sectors. Companies like Nvidia and Microsoft have been major drivers of returns, boosting overall performance.

Important Reality

However, this outperformance is not guaranteed.

• If technology stocks underperform
• If financial sectors outperform

SPUS may lag behind the broader market.

Fees and Expense Ratio

SPUS has an expense ratio of approximately 0.49 percent.

This is significantly higher than traditional S&P 500 ETFs, which often have fees below 0.10 percent.

Why Higher Fees?

The additional cost comes from:

• Sharia screening processes
• Ongoing compliance monitoring
• Portfolio adjustments

Should You Be Concerned?

While fees do impact long-term returns, many investors accept higher costs in exchange for investing in a way that aligns with their values.

The key is understanding what you are paying for.

Key Advantages of SPUS

1. Halal Compliance

SPUS provides a straightforward way to invest in the stock market while respecting Islamic principles.

2. Access to US Market Growth

You gain exposure to some of the largest and most innovative companies in the world.

3. Simplicity

Instead of selecting individual halal stocks, SPUS offers a ready-made solution.

4. Strong Growth Potential

The ETF is positioned toward sectors that have historically delivered strong long-term returns.

SPUS vs S&P 500

Understanding the difference between SPUS and the traditional S&P 500 is essential.

S&P 500

• Fully diversified
• Includes all sectors
• Strong exposure to financials

SPUS

• Sharia-compliant filtering
• Excludes financial sector
• More concentrated portfolio

Key Trade-Off

The real difference is not performance versus underperformance.

It is: 👉 Growth exposure versus diversification

Risks to Consider

Like any investment, SPUS comes with risks.

1. Market Risk

SPUS is still an equity ETF. Its value can fluctuate with market conditions.

2. Sector Concentration

Heavy exposure to technology means:

• Higher upside potential
• Higher downside risk

3. Reduced Diversification

Excluding financials limits diversification compared to traditional ETFs.

4. Sharia Constraints

Because the investable universe is smaller, SPUS may miss opportunities available in the broader market.

Who Should Invest in SPUS?

SPUS is best suited for:

✔ Halal investors

Those who want to invest while following Islamic principles.

✔ Long-term investors

Investors focused on growth over time.

✔ Passive investors

Those who prefer a simple ETF instead of selecting individual stocks.

Who Should Avoid SPUS?

SPUS may not be ideal for:

• Investors seeking maximum diversification
• Investors focused on low fees
• Those uncomfortable with sector concentration

Final Verdict: Is SPUS Worth It?

SPUS is one of the most accessible and well-structured halal ETFs available today.

It offers a powerful combination of:

• Market exposure
• Simplicity
• Sharia compliance

However, it is not a perfect replacement for the S&P 500.

The Reality

SPUS is not about outperforming every index.

It is about:

👉 Investing with conviction
👉 Aligning your portfolio with your values

Video

🧠 Final Insight

For many investors, the best approach is not choosing between SPUS and other ETFs.

It is building a balanced halal portfolio that includes:

• US exposure
• International diversification
• Income strategies

🚀 Want to Go Further?

If you want to build a complete halal portfolio with a clear step-by-step system, you can explore:

👉 Halal ETF Portfolio Models – Canada and US

This includes:

• Full ebook guide
• Ready-to-use model portfolios
• Passive income strategies

⚠️ Disclaimer

This content is for educational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

Dividend investing is one of the most popular strategies in personal finance. The idea is simple: own shares in profitable companies, and those companies pay you a portion of their earnings on a regular basis — monthly, quarterly, or annually. You build wealth and generate income simultaneously.

For Muslim investors, the question is whether this strategy is compatible with Islamic finance principles. The answer, as with most things in halal investing, depends on the details.

The short answer: yes, dividend investing can be halal — but not all dividends are created equal. The permissibility depends on what company is paying the dividend, how that company earns its money, and whether the dividend itself represents a share of real business profits.

What Is a Dividend — And Why It Matters for Halal Investing

A dividend is a distribution of a company’s profits to its shareholders. When a company earns more money than it needs to reinvest in its business, it can return that surplus to the people who own shares.

From an Islamic finance perspective, this is fundamentally different from interest. Interest is a guaranteed, predetermined payment that has no connection to actual business performance. A dividend, by contrast, is a share of real profit — it goes up when the business does well, it can be cut or eliminated when the business struggles, and it reflects genuine economic activity.

This distinction — profit-sharing versus interest — is at the heart of why dividend investing can be permissible while bond investing is not.

When Is a Dividend Halal?

A dividend is halal when all of the following conditions are met:

• The company’s primary business is permissible — it does not derive its main revenue from alcohol, tobacco, gambling, conventional banking, weapons manufacturing, adult entertainment, or pork products
• The company passes the financial screening tests — interest-bearing debt is below 33% of total assets, and prohibited revenue is below 5% of total revenue
• The dividend represents a genuine share of business profits — not a disguised interest payment (as is sometimes the case with preferred shares)
• If the company has minor prohibited revenue below the 5% threshold, the investor purifies the corresponding portion of the dividend by donating it to charity

If these conditions are met, collecting dividend income from that company is entirely permissible — and many scholars consider it one of the most clearly halal forms of investment income available.

When Is a Dividend NOT Halal?

There are several situations where a dividend, despite appearing to be a straightforward profit distribution, is not permissible.

Dividends from Haram Companies

The most obvious case: if the company paying the dividend operates primarily in a prohibited industry, the dividend is not halal regardless of how it is structured. A dividend from a conventional bank, a beer company, or a casino is not permissible — even though it is technically a share of profits.

The profits themselves were generated through haram means. You cannot purify the income by simply donating a portion of it. When the core business is impermissible, the entire investment is excluded.

Dividends from Conventional Preferred Shares

This is a gray area that many investors miss. Preferred shares look like dividend-paying investments, but most conventional preferred shares pay a fixed, predetermined dividend that functions essentially like interest. The payment does not vary with company performance. The rate is set in advance. This structure resembles riba more than genuine profit-sharing.

Most Islamic scholars classify conventional preferred shares as not permissible for this reason. The dividend label does not change the underlying economic reality.

Dividends from High-Debt Companies That Barely Pass the Threshold

A company with interest-bearing debt at 32% of total assets technically passes the AAOIFI screening threshold. But if that debt is a structural feature of the business model — rather than an incidental financing choice — some scholars recommend caution. In practice, use your screening app and verify annually.

The Best Halal Dividend Stocks for Canadian Investors

Some of the world’s strongest dividend-paying companies pass Sharia screening with relatively clean results. Here are categories and examples worth investigating (always verify with a current screening app before buying):

Notice that two of the most popular Canadian dividend stocks — Royal Bank and Enbridge — present problems. RBC is categorically excluded. Enbridge requires careful monitoring because pipeline companies often carry significant debt to finance their infrastructure.

Halal Dividend ETFs — The Easier Approach

Picking individual dividend stocks requires ongoing monitoring and annual re-verification. For most investors, a simpler approach is to use a halal dividend-focused ETF, which does the screening work for you.

While there are no ETFs in Canada specifically marketed as halal dividend ETFs, the major Sharia-compliant equity ETFs do pay dividends from their underlying holdings. WSHR.TO, SPUS, HLAL, and SPWO all distribute income from the dividends paid by their constituent companies.

The advantage of this approach is that you get immediate diversification across hundreds of halal-screened companies, you receive the aggregate dividend income automatically, and the fund manager handles the ongoing compliance monitoring.

What About High-Yield Dividend Strategies?

Canadian investors love high-yield dividend strategies. Canadian banks, pipelines, telecoms, and REITs are the backbone of many income portfolios — and they yield 4-6% or more. Hamilton ETFs, Global X (formerly Horizons), and CI Financial have built entire product lines around high-yield Canadian dividends.

Unfortunately, most of these high-yield strategies fail Sharia screening. Canadian banks — the single largest source of high dividend yield in Canada — are categorically excluded. Many pipeline companies carry too much debt. Telecoms like Bell and Telus require case-by-case verification.

This is the honest trade-off of halal dividend investing: your yield will likely be lower than a conventional Canadian dividend portfolio. A halal dividend approach might generate 2.5-3.5% annually compared to the 4-6% that conventional Canadian dividend investors target.

But this is not as large a practical difference as it appears. The halal portfolio grows its underlying value over time through capital appreciation, while a high-yield conventional portfolio often sees less capital growth. Over a 20-year horizon, the total wealth difference tends to be much smaller than the yield gap suggests.

Purification — The Final Step

Even when investing in halal dividend stocks or ETFs, most companies will have some minor exposure to prohibited activities — a tech company earning bank interest on its cash holdings, for example. Scholars require investors to purify this portion by donating it to charity.

The calculation is straightforward. If Apple’s prohibited income ratio is 0.8% and you received $300 in Apple dividends, you donate $2.40. If SPUS has a 1.4% purification ratio and you received $500 in distributions, you donate $7.00. Most halal investors find the annual purification amount is well under $50, even on substantial portfolios.

Final Verdict

Want to check whether a specific dividend stock is halal? Use our Free Halal ETF & Stock Screener at halaletfhub.com/screener for an instant Sharia compliance analysis.

— Rachid Fouadi, M.Sc., CPA  ·  halaletfhub.com