When one invests in an exchange-traded fund (ETF), the money goes to a manager, who then invests it in specific companies as he deems necessary. These may be halal investments or haram ones. In this way, it is like paying taxes: The government may use your money for halal purposes, like emergency medical services, or for haram purposes, like unjust wars. Is it, then, permissible to invest in an ETF which holds both halal and haram assets, given that one does not know whether the fund manager will use his money for haram investments?
Companies that are not fully based on unlawful transactions, rather some of their transactions are lawful and others are unlawful, such as Costco or Target where most of their transactions are lawful except for a small portion that deals with alcohol and pork, then it is permissible to invest with such companies, however the following must be noted
1) If it is possible to stipulate in the investment agreement that the money is not to be used in the unlawful portion of the investment such as alcohol, then one must stipulate this condition, and money received as profit is permissible.
2) If it is not possible to stipulate the aforementioned condition, then there are two cases:
a- if the percentage of the unlawful portion can be identified, one must separate it and refer in its disposal to the jurist (marja’).
b- if the percentage of the unlawful portion cannot be identified, then one must estimate it to a number that is close enough to the actual, and then settle it with the jurist (marja’).
Settling the amount with the jurist (majra’) means that the jurist may require giving the amount as charity to the poor, or disposing it on a matter that he specifies, or requesting handing it over to him.