This is part of the Robo Advisor series that I’m currently writing. You can read it out of order, but in case you’ve missed them, here are the posts in the series:
Wahed, established in Malaysia in 2019, was the roboadvisor I wish I had gone all in with instead of Stashaway because it has a passive, buy-and-hold investment philosophy that really aligns with mine. Meaning they don’t constantly switch my funds from ETFs to ETFs for “reoptimisation”.
Halal investing
What sets Wahed apart from the roboadvisors in Malaysia is that it practices halal investing, that is investing in accordance with Islamic principles. (You don’t have to be Muslim, however, to invest in Wahed.)
Halal investing avoids investing in industries such as:
- Alcohol
- Tobacco
- Gambling
- Adult entertainment
- Weaponry
As a result, it is probably not surprising why the expense ratio for its proprietary ETFs is a little higher than, say, Vanguard funds. I suppose this is due to the screening work involved to ensure companies are halal. And it’s tempting to think that it’s almost like socially responsible investing (ESG), but there are differences.
You can learn more in their post, The Halal Investing Guide.
How did my funds perform?
I began using Wahed only in 2021, which is at the peak of the US bull market. As a result, my portfolio is in the negative because of it. Not surprised at all. Still, it is one of the few robo advisors I’d highly recommend to beginner investors.
Pros
Good user interface and functionality
Simple, straightforward and while it may not have as many bells and whistles as Stashaway, it was adequate for my needs. For example, you can create multiple portfolios and automate your investments.
Good choice of ETFs
Wahed’s strength is in its broad market ETFs.
Some are proprietary to Wahed:
- Wahed FTSE USA Shariah ETF (HLAL) – tracks US companies (234 holdings)
- Wahed Dow Jones Islamic World ETF (UMMA) – global companies excluding US companies (94 holdings)
Malaysia-domiciled ETFs or funds:
- VP-DJ Shariah China A-Shares 100 ETF (0838EA)
- TradePlus Shariah Gold Tracker
- Malaysia Maybank Sukuk Fund
Others:
- iShares MSCI EM Islamic UCITS ETF (ISDE) – UK domiciled
For fun, I used Portfolio Visualizer to compare HLAL with the famous S&P 500 ETF, Vanguard 500 Index Fund ETF. This, by the way, is not a fair comparison as to do a proper comparison I need to find another Halal ETF or one that is of the equivalent size. However, it would seem that the HLAL ETF actually performed better than VOO since it’s inception!
Simple portfolios that make sense
I am a big proponent of simple portfolios because it is just easier to manage and rebalance. Wahed has the following portfolios as of June 2022:
By securities:
- Money market (97.5% Affin Hwang Aiiman Money Market Fund)
- Malaysian REITs (97.5% in KLCCP Stapled Group, Axis Real Estate Investment Trust)
- Emerging markets (97.5% in iShares MSCI EM Islamic UCITS ETF, 2.5% cash)
- China stocks (97.5% in VP-DJ Shariah China A-Shares 100 ETF (0838EA), 2.5% cash)
- US stocks (97.5% HLAL, 2.5% cash)
- Gold (97.5% in TradePlus Shariah Gold Tracker, 2.5% in cash)
By risk tolerance:
- Very aggressive (86,5% IN HLAL and UMMA, 12.5% in VP-DJ Shariah China A-Shares 100 ETF, 1% cash)
- Aggressive (71.5% in HLAL and UMMA, 7.5% China, 15% Sukuk, 1% cash)
- Moderately aggressive (59% HLAL and UMMA, 5% China, 45% Maybank Sukuk fund and 5% Gold, 1% cash)
- Moderate (45% HLAL and UMMA, 5% China, 30% Maybank Sukuk fund and 5% Gold, 1% cash)
- Moderately conservative (25% HLAL and UMMA, 5% China, 65% Sukuk and 5% Gold, 5% cash)
- Very conservative (90% Sukuk and 10% cash)
I chose to invest purely in US Stocks, which means 97.5% of my fund is in their HLAL ETF. (As it’s considered a 100% equity portfolio, it’s considered very aggressive.) I like that my portfolio is not stuffed with over a dozen ETFs. Keeping track of one ETF is just more minimalist, don’t you think?
Also, I like that you can choose to go 100% into one securities such as gold, or China stocks. This can make sense to people who wants to tilt their portfolios towards a certain security or geography, or want a fuss-free way to access certain securities. However, most DIY investors would probably wonder why they should pay Wahed an annual fee to do something they can easily do through a broker.
A casual analysis of their portfolios seems to indicate that their risk-centred portfolios (aggressive to conservative) are very diversified, thanks to the presence of HLAL and UMMA which literally means you are invested in companies around the world. Imagine owning shares of Apple, Google, Nestle, BHP at the click of button!
Their portoflios, however, tend to tilt towards China in terms emerging markets, which seems to hint that they’re betting on China to succeed.
As Wahed changes their portfolio make-ups from time to time, do read about the breakdown of the portfolios in detail here.
You can start with a small capital to have easy access to foreign markets
When you buy ETFs directly from a broker, you must contend with complicated account openings, high brokerage fees (RM8 to RM36 via local brokers) and the high price tags of some ETFs as not all brokers offer the option to buy fractional shares. Usually, to ensure that your brokerage fee is a low percentage of your investment, investors try to invest about RM3000 at one go.
With Wahed, you can start investing with as low as RM100 and on top of that, automate your investments.
Automatic rebalancing
What does it mean to rebalance your accounts? Well, as time goes by, your investments could run away from the allocation you’ve set from it. For example, let’s say you build a portfolio of 60% equities and 40% bonds. Over time, thanks to a bull market, the equity portion increases, and your portfolio ends up 75% equities and 25% bonds. An investor would then have to sell 15% of their equities to buy more bonds to “rebalance” the portfolio to the original 60-40 ratio. It can be a tedious exercise to do it manually – Wahed does this for you automatically.
They use broad market ETFs
I love the fact that they have broad market ETFs, which means you can implement a Boglehead-ish approach to your investments via Wahed. Bogleheads believe in “buying the haystack rather than the needle”. Meaning, they’d rather buy every single stock in the market rather than hedge their bets with a few companies, sectors or region. Wahed allows one to invest in companies around the world, even if it doesn’t 100% cover the entire market as some companies will be excluded.
The top 10 holdings for HLAL
HLAL seems heavily weighted on Apple. This can be a concern as if Apple shares fall, it will have a big impact on the ETF. Alternatively, if Apple shares soar, the ETF will soar along with it.
The top 10 holdings for UMMA
Do visit Wahed to download the factsheet and prospectus for HLAL and UMMA. Yes, I always encourage people to really dig deep into what they’re investing in, especially when it comes to roboadvisors. Know what you’re investing in!
Cons
Fees and expense ratios
At 0.5% the expense ratio for HLAL is still low, mind you, compared to many unit trust funds. However, do keep in mind that Wahed takes a 0.3% to 0.79% annual management fee on top of this. That money will be taken out of the funds you have invested with Wahed.
Wahed’s fees are higher than most roboadvisors, though not as high as MyTheo which is about a whopping 0.5% to 1% per year. Over time, as your investments grow, so does the amount taken out of your funds for fees. In a bear market where your investments are in the negative, this can increase the pain.
You will be charged if you want to automate investments
Which is a bummer, as it discourages you from automating your investments.
Should you invest with Wahed Invest?
Wahed Invest is an excellent roboadvisor for beginners, especially those seeking for halal investments. I would argue that its investment philosophy is passive and it’s great for those who do not have the time to monitor the markets and want a hands-off approach to investing.
Of course, seasoned DIY investors can just buy HLAL and UMMA directly from brokers. However, for those who find it a hassle to DIY their investment, Wahed provides a very simple and easy way to invest in the international markets. Though, like with all robo advisors, it’s important to keep a watch on the annual fee to ensure that it’s still worth your while.
Use my code sietai1 to get RM10 when you open an account with Wahed Invest.
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Elizabeth Tai 