Islamic Shariah-compliant ETFs and unit trusts have become popular investment options for investors around the world regardless of their religious beliefs.
Shariah-compliant funds invest according to Islamic law. Islamic teachings consider activities like gambling, alcohol, tobacco, and usury harmful or unethical and prohibit Muslims from investing in enterprises engaged in them.
In ETF, a fund shall undergo a comprehensive Shariah screening exercise before it can be qualified as Shariah-compliant ETF. The screening of the index constituents is done in accordance with the methodology prescribed by the Shariah board, committee or advisor of the index provider, the regulatory body and the fund itself. To ensure continuous Shariah compliance, the Shariah screening is undertaken at the time of investment decision and subsequently throughout the investment period. In other word, Shariah-compliant ETF tracks only benchmark index where the index constituents are Shariah-compliant companies.
Shariah-compliant fund welcomes all investors seeking to align their investment with their values as their values-based approaches overlap with environmental, social, and governance (ESG) factors.
Similar to a stock, an ETF's dividend yield, also known as distribution yield, is presented as a percentage of the ETF's market price. This metric serves as a valuable indicator for investors, offering insights into the income the fund has distributed over a specific period, which can be either semi-annually or annually, for example.
In ETF, benchmark is an index that is used by eq8 to replicate returns. Generally, a benchmark includes a wide range of stocks of a certain size, industry classification or geographic location. For example, Eq8 Dow Jones US Titans 50 closely correspond to the performance of the 50 largest Shariah-compliant companies listed in the US.
Liquidity refers to the ease with which an asset can be converted into cash during trading without causing a significant impact on its price. Higher liquidity indicates a more efficient and cost-effective trading process. Conversely, assets with lower liquidity may entail higher trading costs and a longer trading duration.
Float-adjusted market cap shows how much a company is currently worth based on the total market value of its freely tradable shares. These are the shares available for public trading, excluding ones held by company insiders that cannot be traded.
The NAV of an ETF represents the total value of all assets within the fund at a specific moment in time.
Every Eq8’s ETFs are assigned a distinctive lettering system, known as a "ticker" for identification on an exchange.