How to Invest in Index Funds in Saudi Arabia (2026): A Complete Guide

Why Index Funds Are the Starting Point Financial Education Recommends

In the 2014 annual letter of Berkshire Hathaway shareholders, Warren Buffett discusses how to invest money that is left to his wife when he dies. He recommends investing 90% of the cash into a very low-cost index fund, specifically one that tracks the performance of the S&P 500. His justification for this was simple yet very damaging to the active management industry, most professional money managers and firms, with high fees for their management, do not outperform the S&P 500 after a 10 year period.

There is a vast amount of data available that supports this conclusion. SPIVA scores (S&P Indices Versus Active) are published on a semi-annual basis and show that, on average, 80-90% of actively managed US large-cap funds will underperform the S&P 500 index over 15 years. Fees are to blame – a 1-2% annual fee, when compounded over many decades, will significantly reduce returns compared to simply owning the index with a low-cost investment vehicle.

For Saudi investors starting their investment journey in 2026, this evidence is directly actionable. The simplest, most statistically defensible starting point for building long-term wealth through US markets is a low-cost, Shariah-compliant index fund held consistently for 10 or more years.

What Is an Index Fund?

Investors typically seek to gain exposure to different types of investments through investing in a variety of investment categories. Therefore, by investing in an index fund, investors are effectively replicating a specific market index's (i.e., the S&P 500, the MSCI World and/or the Nasdaq 100) performance. An index fund can determine which companies are included in the index, and thereby how much of each company will be purchased and included in the fund. This type of indexing provides investors with an investment vehicle that automatically promotes diversification across many different types of companies (i.e., several to many companies) and allows investors to accomplish such a goal at a relatively low cost, as well as without any risk related to the individual stock manager selecting the investments after the fact.

When the index rises 10%, the fund rises approximately 10%. When the index falls 5%, the fund falls approximately 5%. The fund never attempts to beat the market, it simply is the market, minus a small annual expense ratio. Index funds and ETFs (Exchange-Traded Funds) are effectively the same thing in practice for Saudi investors. ETFs are the index fund structure accessible through a standard trading account without minimum investment requirements.

Why the Standard S&P 500 Is Not Halal — and What Saudi Investors Should Use Instead

A common misconception among Saudi investors is that a standard S&P 500 ETF like SPY or VOO is appropriate for Muslim investors. It is not. The S&P 500 includes companies that fail AAOIFI Shariah screening: conventional banks like JPMorgan Chase and Bank of America (core business is interest-based lending), insurance companies, alcohol and beverage producers, and businesses with debt ratios exceeding 30% of market capitalization.

Shariah-compliant alternatives use AAOIFI Standard 21 filters to produce similar investments to large-cap US stocks without any non-compliant names. The end result is a portfolio that captures the majority of S&P 500 growth but is also Islamic-Compliant. Historically, Shariah-compliant alternatives generated superior returns compared to traditional S&P 500 because the excluded financial sector has consistently underperformed against the technology-driven sector.

Best Index Funds for Saudi Investors in 2026

SPUS — SP Funds S&P 500 Sharia Industry Exclusions ETF

Saudi and Gulf Cooperation Council (GCC) (Oman, Qatar, UAE, Bahrain, and Kuwait) investors searching for Shariah-compliant exposure to US large-cap indices consider SPUS the "gold standard". SPUS was launched on December 31, 2019, and is listed on the NYSE Arca. The Fund invests in a Shariah-compliant version of the S&P 500. SPUS follows a replication strategy where it removes companies from the S&P 500 that have been deemed non-compliant by an independent Shariah supervisory board. The top five holdings of the SPUS as of January 2026 are Apple, NVIDIA, Microsoft, Amazon and Meta, the world's most influential technology leaders.

Since inception, SPUS has delivered a compound annual growth rate of approximately 16.91%, outperforming the standard S&P 500 over the same period. Expense ratio: 0.45% annually ($45 per $10,000 invested per year). Available on Raseed.

HLAL — Wahed FTSE USA Sharia ETF

HLAL tracks the FTSE USA Shariah Index and offers broader diversification than SPUS with approximately 211 holdings across US large and mid-cap equities. Managed by Wahed, an Islamic fintech company dedicated to Shariah-compliant investing. Expense ratio: 0.50%. Top holdings include Apple, Microsoft, Meta, Alphabet, and Tesla.

VOO — Vanguard S&P 500 ETF (Non-Screened Investors Only)

VOO tracks the full S&P 500 with an ultra-low expense ratio of 0.03% annually, approximately 15 times cheaper than SPUS. The world's most popular index fund by assets under management. Note: VOO includes conventional banks and other non-Shariah-compliant holdings. Muslim investors should use SPUS or HLAL as their primary S&P 500 vehicle.

The Long-Term Impact of Fees: Why This Matters More Than You Think

The expense ratio of an index fund is deducted daily from the fund's assets, it never appears as a separate line item. At 0.45% for SPUS, annual cost on a $10,000 position is $45. Over 30 years, the fee difference between SPUS (0.45%) and VOO (0.03%) on a growing $1,000/month contribution costs approximately $100,000 in final wealth. For halal investors, SPUS's outperformance has historically justified the fee premium but this is not guaranteed to continue. Minimising costs within your Shariah-compliance constraints is important.

Related: Compound Interest: Calculator & Guide for Saudi Investors

Step-by-Step: How to Buy Index Funds from Saudi Arabia

Download the Raseed app on iOS or Android, or open raseedinvest.com on desktop.
Tap 'Create Account' and complete your email registration.
Complete identity verification (KYC): upload your Saudi national ID or Iqama and take a selfie. Verification is typically instant.
Fund your account via bank wire transfer from your Saudi bank. Raseed charges no fee on wire deposits.
Search for SPUS in the search bar to find the Shariah-compliant S&P 500 ETF.
Tap 'Buy' and enter your investment amount. You can start from as little as $1 using fractional investing.
Select 'Market Order' for immediate execution and confirm.
Consider setting up a recurring monthly purchase to maximise dollar-cost averaging benefits.

Dollar-Cost Averaging: The Most Effective Index Fund Strategy

Dollar-cost averaging (DCA) is the practice of investing a fixed amount at a regular interval, weekly, bi-weekly, or monthly, regardless of current market prices. When prices are high, your fixed amount buys fewer shares. When prices are low, it buys more. Over time, this naturally produces a lower average cost per share than investing all at once.

A Saudi investor contributing SAR 1,000 per month to SPUS consistently over 20 years, assuming an 8% annual return, will substantially outperform one who invests the same total amount but attempts to time entry and exit points. DCA removes the psychologically impossible challenge of market timing entirely.

Frequently Asked Questions

Is SPUS available on Raseed?

Yes. SPUS is available on Raseed as a full ETF position. You can invest any dollar amount from $1 using fractional investing. Standard trading fees apply: from $0.50, capped at $3 per transaction.

Are index fund dividends considered halal?

For Shariah-screened index funds like SPUS, dividends are generally considered halal as they represent proportional profit distribution from permissible businesses. SPUS also issues purification guidance for any minor non-compliant income that may pass through the fund, typically a very small percentage of total distributions.

What happens to my index fund if the platform shuts down?

Your ETF holdings are held in custody separately from the platform's own assets under standard securities regulations. If a regulated platform ceased operations, your holdings would be protected. The ETF shares you own are yours, not the platform's property.

Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice. All investing involves risk. Past performance does not guarantee future results. Securities brokerage services are provided by Fullerverse (SC) Limited, licensed and regulated by the Financial Services Authority Seychelles (Licence No. SD152), a wholly-owned subsidiary of Raseed Invest Inc. Capital is at risk.