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Wealthsimple which is Canada’s most popular robo-advisor (online investment manager) introduced the first Halal Investing Portfolio for Canadians in 2017. They are also front runners in the area of Socially Responsible Investing (SRI) options.

The Halal portfolio is unlike a typical investment portfolio in that it only contains investment assets that are in compliance with shariah law. Similar to other Wealthsimple portfolios, the Halal investing portfolio is designed to cut your investment and trading fees, remove the stress of portfolio rebalancing, and to maximize your returns.

Wealthsimple is offering readers of this blog a promotional bonus offer to invest up to $10,000 FREE for one year.

This review of Wealthsimple’s Halal Portfolio digs into what a halal investment is, assets making up the portfolio, their performance, investment fees and risks.

Wealthsimple Halal Investment Portfolio

Wealthsimple was founded in Canada in 2014 and has since expanded operations to the United States and the United Kingdom. They have more than 100,000 clients and $3 billion in assets under management.

What is a halal investment? It refers to financial products that are in compliance with shariah. Islamic Law specifically prohibits Muslims from profiting off of loans by collecting interest (usury). What this means is that traditional assets like bonds and GICs have no place in a halal portfolio. 

In addition, it also goes against the tenets of Islam to participate in, promote, or invest in activities/businesses involving alcohol, tobacco, gambling, weapons, and pork. These activities are considered “Haram” (or forbidden).

Halal Investment Portfolio Methodology

In order to design a Shariah-compliant portfolio, Wealthsimple utilizes the MSCI Islamic Index Series Methodology which is approved by a committee of Shariah scholars and excludes companies that earn more than 5% of their revenue from:

  • Gambling
  • Alcohol
  • Tobacco
  • Arms Production
  • Hotels
  • Cinema
  • Adult Entertainment
  • Pork
  • Interest or Excessive Leverage (debt)

To determine whether a company carries excessive debt, the following financial ratios are calculated:

  • Total debt over total assets
  • The sum of a company’s cash and interest-bearing securities over its total assets, and 
  • The sum of a company’s account receivable and cash over its total assets.

Companies with debt ratios exceeding 33.33% are excluded.

The portfolio is made up of 50 stocks and tracks the MSCI All-Country World Islamic Index (ACWI). It is optimized for global diversification, performance, and return.

Some of the stocks making up the Halal Investing Portfolio are Pfizer (PFE), CGI Inc (GIB.A), Chevron Corporation (VX), SNC-Lavalin Group Inc. (SNC), Canadian National Railway Co. (CNR), Intel Corp (INTC), Exxon Mobil Corp. (XOM), Merck & Co Inc. (MRK), Suncor Energy Inc. (SU), and Nike Inc. (NKE). 

All 50 stocks (companies) included at the time of this post (March 2019) are attached to the bottom of this post.

Investment Accounts Offered

Observant Muslims can use halal portfolios to invest in a TFSA, RRSP, RESP, RRIF, LIRA, or non-registered personal, joint, or corporate investment accounts.

Wealthsimple Halal Portfolio Review - Smart Investing

How To Open a Wealthsimple Account

It is easy to start investing with Wealthsimple and the onboarding process takes about 5 minutes.

Click here to open an account and get started (bonus – invest up to $10,000 for FREE).

Answer a few questions so they can suggest a portfolio and asset allocation that meets your needs.

Start investing and building wealth.

Wealthsimple has no minimum balance requirement and all accounts enjoy:

  • Free expert financial advice
  • Automatic rebalancing
  • Dividend re-investing
  • Personalized and diversified portfolios
  • A low management fee
  • Automatic deposits

When you transfer your investments from another bank ($5,000 or more), Wealthsimple pays the transfer fees your bank charges.

Wealthsimple Halal Portfolio Fees

The fees are the same for all portfolios – whether regular, socially responsible investing, or halal portfolios. Fees you pay are:

  • $0 – $100,000: 0.50% per year
  • $100,000+: 0.40% per year

Large accounts exceeding $100K also benefit from tax loss harvesting, free Priority Pass membership and access to more than 1,000 VIP airport lounges around the world.

Is Wealthsimple Safe?

Wealthsimple holds your funds with Canadian ShareOwner Investments Inc. which is regulated by IIROC and is a member of the Canadian Investor Protection Fund (CIPF). This means that your account is protected up to $1 million against insolvency or bankruptcy. 

The company also uses bank-level encryption to protect your private information.

Halal Investment Portfolio Cautions

As noted earlier, the Wealthsimple Halal Investing Portfolio is an all-equity portfolio consisting of 50 different stocks. Since bonds are forbidden, no fixed-income instrument is included. What this means is that the portfolio has a Growth risk profile (i.e. aggressive).

A 100% stock holding is not suitable for everyone. For example, if you are a senior or risk-averse investor looking for a conservative or balanced portfolio, you will need to balance between holding cash and a halal portfolio.

The dynamics between halal portfolios and cash savings are important. Depending on your investing profile, your cash holdings vs. portfolio investment may look as follows:

Conservative Investor (investors seeking stability and modest returns)

  • Halal portfolio: 35%
  • Cash holding: 65%
  • Modelled portfolio performance (annualized since inception) as of February 28, 2019, is 3.60% (net of fees)

Balanced Investor (investors with medium to high-risk tolerance)

  • Halal portfolio: 50%
  • Cash holding: 50%
  • Modelled performance (annualized since inception) as of February 28, 2019, is 5.4% (net of fees)

Growth Investor 

  • Halal portfolio: 80%
  • Cash holding: 20%
  • Modelled performance (annualized since inception) as of February 28, 2019, is 8.9% (net of fees)

Halal vs. Socially Responsible Investing Portfolios

Both Halal and SRI portfolios allow individuals to invest according to their values. Halal portfolios adhere to shariah law while SRIs invest in companies that champion environmental and social responsibility. For example, SRI invests in stocks (companies) with a low-carbon exposure, excellent human rights record, good corporate governance, or that adopt clean technology.

In some instances, Halal and SRI screen requirements may intersect.

Wealthsimple SRI portfolios contain the following ETFs:

  • iShares MSCI ACWI Low Carbon Target ETF (CRBN)
  • PowerShares Cleantech Portfolio (PZB)
  • iShares Jantzi Social Index ETF (XEN)
  • Vident International Equity Fund (VIDI)
  • BMO Mid Federal Bond Index (ZFM)

The same management fee is charged on Halal and SRI portfolios. However, the underlying MER paid to ETF providers is higher for SRI ETFs.

Other Halal Investing Options in Canada

Investors can access other stocks, mutual funds, and exchange-traded funds that are Shariah-compliant. 

All these assets can be held inside a variety of accounts – TFSA, RRSP, RRIF, RESP, and more.

Wealthsimple Halal Portfolio Recap

Wealthsimple’s Halal Portfolio provides devout Muslims with easy access to investments that not only complies with Shariah Law, but are also personalized, low-cost, globally diversified, and risk-return optimized.

Wealthsimple is offering readers of Savvy New Canadians a promotional offer to invest up to $10,000 free of charge for 1 year when you sign up here.

Do you know of any other investment assets in Canada that qualify for as Halal? Leave them in the comments.