Determining the exact amount of money earned from impermissible holdings within a mutual fund or ETF can be very difficult. This is because the individual holdings within the fund may earn income from both permissible and impermissible sources. Therefore, one is expected to make a reasonable estimate and give a reasonable amount of sadaqa (charity) to offset any impermissible earnings.^[1] This is known as purification.

To help determine the exact amount that should be given in sadaqa, you may consult with an Islamic finance expert who offers services in such matters. Additionally, there are services and apps that can generally help determine the percentage of non-compliant income earned through a particular stock. For example, some apps may provide a breakdown of non-compliant sources of income within a stock or mutual fund, which can then guide you in calculating the amount to give in sadaqa. However, it is important to note that different services or apps may use different standards, some of which are stricter than others. Therefore, if you are uncertain, seeking guidance from an experienced Islamic finance expert is recommended to accurately determine the amount of sadaqa to give.

Regarding investing in funds marketed as Sharia-compliant, such as SPUS, HLAL, or AMANX, these funds make it easier to ensure that you are investing in permissible sectors. However, this does not mean that you must invest only in these funds. If you choose to invest in conventional funds like VOO, it is sufficient to reasonably calculate and give the percentage of non-compliant income in sadaqa, as long as the majority of the fund’s holdings are in permissible sectors. Both options are acceptable, and the key is to purify your wealth by giving away any income derived from impermissible sources.

May Allah grant you barakah in your wealth. Āmīn.

And Allah knows best.

Mf. Zeshan Ahmed
Senior Assistant Mufti, Darul Iftaa Chicago

Checked and Approved: 

Mf. Abrar Mirza
Head Mufti, Darul Iftaa Chicago