After the getting-started post, a reader raised the question sitting under all of this: what's the cost of the halal version? The standard S&P 500 is the default benchmark for American investing. If a Muslim investor picks a screened version instead, the intuitive assumption is that removing companies must mean removing return. Fewer stocks, less diversification, worse performance. A penalty for principle.
It's a reasonable worry, and worth checking rather than assuming. So I put SPUS (the SP Funds S&P 500 halal ETF) head-to-head against the standard S&P 500 total return over the last three years, starting both at $1,000.
Growth of $1,000
The two lines track each other almost perfectly for most of the window, which is the first thing to notice. Screening the index did not send it off on some wildly different path.
Here's the part that surprises people. Over these three years, the halal version didn't lag the S&P 500 — it slightly beat it. SPUS turned $1,000 into about $1,976; the standard S&P 500 reached about $1,889. That's roughly a 98% gain versus 89%, or about 25.5% a year versus 23.6%.
But notice the volatility and drawdown columns before you celebrate. The halal fund got its edge by being a little bumpier: its annualized volatility was higher (about 15.5% vs 13.3%) and its worst peak-to-trough drop was deeper (about −11% vs −8%). It earned more, but the ride was rougher. That's not a free lunch; it's a different risk profile.
Why the screened version can win — and why that's fragile
The reason isn't magic, and understanding it is the whole point. When you screen the S&P 500 for halal compliance, the single biggest thing you remove is the financial sector — banks, insurers, and other interest-based businesses, roughly an eighth of the index. In a market-cap-weighted index, whatever you remove gets redistributed to what remains. And what remains is heavily technology.
So a halal S&P fund is, structurally, a tech-tilted S&P fund. Over the last few years, technology has been the market's engine, so that tilt paid off and the screened version pulled ahead. The mirror image is the risk: if tech has a bad stretch, or financials rally, the same tilt works against you. The screening didn't make SPUS better; it made it different, in a direction that happened to be rewarded recently.
What you give up
- A higher fee: roughly 0.45% versus about 0.03% for a plain S&P 500 fund like VOO
- Some diversification: no financials, and heavier concentration in a few mega-cap tech names
- A smoother ride: modestly higher volatility and deeper drawdowns
- A small yearly purification step on a sliver of dividend income
What you get
- Faith-aligned ownership, screened at the holdings level rather than after the fact
- Very S&P-like exposure: the same mega-cap U.S. companies, minus the excluded sectors
- A tech tilt that, in growth-led markets, has recently meant competitive or better returns
- A simple, liquid, one-ticker way to be invested
Three caveats worth stating plainly
Three years is a tech-friendly window. This stretch was unusually kind to the exact sectors a halal screen overweights. A period where financials or value outperform could easily flip the ranking, and there have been such periods before.
The fee gap is certain; the outperformance isn't. The ~0.45% versus ~0.03% difference is guaranteed to compound against you every year. The return edge is a maybe. Don't count on the latter to cancel the former.
Screening is about ownership, not just performance. For most Muslim investors the question isn't really "which returns more" — it's that owning shares of non-compliant businesses is itself the issue, so a conventional fund isn't an option regardless of its return. The good news the data delivers is that honoring that constraint has not required a performance sacrifice recently. That's a reassurance, not a strategy.
If the reader's fear was that faith-screening means settling for less, the last three years say otherwise. Just don't mistake a favorable tailwind for a permanent edge.