Wahed is hopefully the direction in which more Islamic finance products are moving towards. It provides a clean online and mobile user interface, offers a range of products and importantly allows you to easily invest your money in a Shariah compliant manner. Keep reading this review to understand its usability, why Wahed is Shariah compliant and also how Wahed can help you invest in the largest companies around such as Tesla and Apple.
Our previous finance review discussed at length about the current and future state of the UK’s digital Islamic finance market; with the future looking very promising when it comes to Muslims and their money.
Wahed however is at an interesting stage of its development. At the time of writing it’s less than five years old so it can still be called a ‘new’ company. However, since 2019 it’s already expanded into over 130 markets. Further proof of its growth was seen in June 2020 when it raised $25 million of funding from the investment arm of Saudi Aramco – the world’s most profitable company. This only shows the demand for Wahed and Islamic investing is huge.
Started in New York by Ivy League graduate Junaid Wahedna, he sought a way to not only help fellow Muslims grow their money but also get around the hassle of identifying what is acceptable within Islamic finance.
On a personal level I’ve used Wahed for almost two years now and have been impressed by the product. I’m thankful that Muslims have an investing platform which allows for the opportunity to grow their money in a halal manner.
In preparation for this review I reached out to Wahed for more ‘behind the scenes’ information and received a special sign-up page. If used it will provide a small referral fee for myself which allows me to further progress the articles on TML. Don’t worry though…I’ll be discussing both the positives and negatives about Wahed!
Let’s dig into Wahed and explore how you too can use it to grow your money. This review has been split into the below three sections and aims to let you know what is going on behind the scenes when you sign up:
1-How is Wahed Shariah compliant?
2- How to use Wahed?
3- What can Wahed help me do?
How is Wahed Shariah Compliant?
How is Wahed Shariah compliant – this is the first question which needs to be addressed before we go any further. Whether you’re contemplating a product or an action this should always be the first question to ask.
Wahed’s selection criteria for investments are based on whether they conform to Islamic finance principles. They consider the industry, whether interest exceeds a certain proportion of company revenue (usually 5%) and certain financial ratios linked to debt.
Wahed is also an associate member of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). This global body aims to regulate and standardise practises within Islamic Finance. CEO Junaid Wahedna sees this as an important step in building trust with the global Muslim population.
Wahed understands the scepticism that Muslims have when it comes to finance and Islam but in the CEO’s words “as Wahed continues to grow and innovate, it’s important that our clients and partners know that we are committed to halal practices”. This is just one of the steps Wahed takes to provide trust in its products.
“As Wahed continues to grow and innovate, it’s important that our clients and partners know that we are committed to halal practices”
As with many digital banks the transparency is very clear of who is responsible for what. The selection committee that decides the Shariah compliant investments is a leading US based ethical financial advisory firm, Straightway Ethical Advisory.
The members and their qualifications are listed on the Wahed website and Wahed is constantly improving how it screens acceptable stocks. The improvements are both from expanding their ethical advisory team such as including Sheikh Dr. Yasir Qadhi or to conducting regular investment reviews making sure investments still confirm to Islamic finance principles.
Their ongoing commitment to investment reviewing can be seen via their annual purification report.
A tailored purification report is sent to every investor and summarizes how even with careful and meticulous review there is scope for some returns being non-halal. On a personal level my purification report on average has shown less than £5 per year.
How To Use Wahed?
As a digital fintech product, the set-up process is fast and smooth. There’s no paperwork and the sign-up process is all online. As I am more familiar with the UK set-up, I’ll focus on that but it’s safe to presume the ease of opening an account is across all regions.
As with all financial institutions you will need to provide a UK address, national insurance number and confirm you are over 18 years old. The sign-up process from start to finish took approx. 5 mins (and that included me reading all the FAQs as I always end up doing!).
For an investment platform the ease of set up is something that immediately attracted me towards Wahed. Investing in the market is something that most people want to do but at the same time can be totally alien to them. No unnecessary jargon is used and after drilling down into the FAQs you have a good feeling of what Wahed is about.
In addition to this is its mobile app. This brings Islamic investing into the 21st century and puts it on par with other investment platforms out there. No longer do Muslims feel left behind using archaic websites to make obscure investments.
One question you will be asked at the sign-up stage is what is the risk profile you want to invest in? This essentially means how much market volatility and corresponding potential returns are you willing to take.
The 5 risk portfolios range from very conservative to very aggressive. The conservative portfolios lean more towards products which do not historically have large volatility whereas aggressive portfolios lean towards if you are willing to take more risk. The decision for each person to make is essentially between more risk and higher potential returns or less risk with less potential returns.
There are 5 products that Wahed invests in with each portfolio having a different split depending on the portfolio selected:
1) Global stocks – stocks from companies in developed countries
2) Emerging Market stocks – stocks from emerging markets which allows for diversification and potential higher returns
3) Sukuks – used for equity financing where the holder received revenue from an asset (the closest non-Islamic equivalent is a bond)
4) Gold – used for diversification from the above options as well as Gold having a traditionally low correlation to stocks and bonds.
5) Cash
Investments can never be guaranteed as prices can go up and down; historically over the long-term prices have gone up in the overall global markets and so as I am personally investing for the long term. Therefore, I have chosen to go with an aggressive portfolio which is one less than the most aggressive portfolio option.
The below pie charts show how a very conservative portfolio is different to a very aggressive portfolio via the products used. You can view each portfolio’s split on the website as well as historical performance.
You are free to take your money out of Wahed at any time and there is no minimum holding period or penalty fees for doing so. Minimum investment payments is £50.
I’ve had 1 or 2 instances where my payments from being taken to being invested took approximately 4 days which is a long time. However, I haven’t seen any such delays with my regular contributions in the past year.
It’s easy to forget that Wahed is relatively new and is offering something that has never been offered before – a fully Shariah compliant investment platform. There were bound to be teething problems when it first started. However, whenever I did have a question I simply raised a ticket via the website to customer service. The response has always (and I mean always!) been within 24hrs on any of my questions and if you needed more clarification, they were equally quick with that.
The only fees that Wahed directly charges for the platform is £2.99 per month. There are no fees for any zero balances.
What Can Wahed Help Me Do?
Investments can go up as well as down so nothing is ever guaranteed, Wahed makes that very clear. Personally, I see these investments for the long term and so I am ok with the volatility at any given year (I’m looking at you 2020!).
When thinking about the long term Wahed advises that at the minimum period you should be looking at is 5yrs. My personal plan is to regularly invest small amounts every month and just forget about it. I know some days it will be up and some days it will be down, so there’s no need to worry.
I’ve whittled it down to 6 reasons why I use Wahed and why I will continue to do so:
1.Helps develop a habit of saving for the long term
2.Range of products offered with some being tax free
3.Saves me time from doing my own research
4.Lower fees compared to actively managed funds
5.Source of passive income
6.Increases my financial knowledge
1.By using Wahed as a platform for the long term, I’ve developed a great habit of saving. Forbes in its 7 foolproof steps for building wealth talked about how long term investing should be part of your plan – one which I have personally taken on board.
2.For the UK market there are three offerings that Wahed provides: a general investment account, a stocks and shares ISA and a Self-Invested Personal Pension.
You might be most familiar with the ISA and it’s tax free returns – but do have a read and understanding of each one’s rules and tax implications in your own time before investing. I have personally invested in the ISA as for me it offers a tax-free way to grow my money.
3.Wahed offers me a one stop platform where there are only Shariah compliant offerings. This saves me an enormous amount of time of research both of the company and also if they are Shariah complaint. I do not have to read any financial statements and sieve through financial jargon.
4.Wahed is a robo-advisor which results in lower fees. Wahed will rebalance your portfolio automatically if it feels it needs to depending on your chosen risk profile so you don’t have to worry about your portfolio and any movements occurring in the markets.
5. Wahed also allows me to have a passive income – income where I don’t do anything to earn it! Apart from the fund prices potentially increasing in value, each fund provides the potential for a dividends. This is a payment that the investors can receive if the fund decides to give them out, boosting your portfolio without you investing any extra amounts.
Further, Wahed has allowed me to invest in some of the largest companies around such as Tesla and Apple by having exposure to the HSBC ISLAMIC GLOBAL EQUITY INDEX as part of its global stocks exposure. Have a look below to see the top 10 holdings in this index:
6.Learn more about finance – they hold regular webinars on topics such as U.S. focused IRAs (individual retirement accounts) to zakat webinars. I’ve increased my finance knowledge as a result of these webinars which I encourage everyone to do.
Wahed has offered Muslims the chance to invest their money in an efficient, Shariah compliant and easy to understand way. If you’re tempted to give Wahed a go, we’ll be grateful if you use our referral code which Wahed has provided.
Please note the information provided on this website does not, and is not intended to, constitute financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Investments can go up as well as down meaning you may end up with less than your original amount put in.
