How does the HLAL ETF work?
6 min read
By Beqa Bumbeishvili, ETF Insider

How does the HLAL ETF work?

The HLAL ETF, also known as the [ETF NAME], is a financial instrument that has been gaining attention from investors in recent times. In this article, we will provide you with an in-depth understanding of this ETF, its underlying assets, the benefits of investing in it, and important considerations before you decide to invest.

HLAL ETF Underlying and Exposure: What Does It Track and How?

To comprehend the functioning of the HLAL ETF, it's crucial to grasp what it tracks and how it gains exposure to these assets. The HLAL ETF invests in a diverse set of financial instruments, carefully selected to align with its investment objective. These instruments are chosen with the aim of producing daily returns consistent with the fund's goal.
The underlying index of the HLAL ETF is constructed and maintained by S&P Dow Jones Indices LLC. This index is designed to measure the stock performance of U.S. companies operating in the basic materials industry. These companies are involved in various sectors, including the production of aluminum, steel, non-ferrous metals, commodity chemicals, specialty chemicals, forest products, paper products, as well as the mining of precious metals and coal. This index is recognized by its Bloomberg ticker symbol ""DJUSBM.""
The HLAL ETF principally invests in two types of financial instruments:
Derivatives: This includes financial instruments whose value is derived from the value of an underlying asset or assets, such as stocks, bonds, funds, interest rates, or indexes. The fund uses derivatives as a means to seek returns that are inverse (-1x) to the returns of the underlying index for a single day. Swap agreements are commonly used in this strategy, involving contracts with major global financial institutions.
Money Market Instruments: The fund also invests in short-term cash instruments with high-quality credit profiles and short maturities. These include U.S. Treasury Bills and Repurchase Agreements.
It's important to note that the HLAL ETF utilizes a mathematical approach to investing, focusing on the type, quantity, and mix of investment positions needed to align with its daily investment objective. Unlike traditional investment strategies, the fund does not base its decisions on the merits of individual securities, instruments, or companies. Instead, it aims to provide inverse exposure to the single-day returns of the index, without consideration of market conditions or trends.

HLAL overlap How does work the HLAL ETF?HLAL overlap How does work the HLAL ETF?

HLAL ETF: Benefits to Invest in This ETF

Now that we have a clearer understanding of the HLAL ETF's underlying assets and exposure strategy, let's explore the benefits that may make it an attractive investment option:
Diversification: The HLAL ETF offers exposure to a broad range of companies in the basic materials industry. This diversification can help spread risk and reduce the impact of poor performance from a single stock or sector.
Inverse Exposure: For investors seeking inverse exposure to the daily returns of the basic materials industry, the HLAL ETF provides an efficient way to achieve this without the complexities of shorting individual stocks.
Liquidity: Being an ETF, the HLAL ETF typically offers good liquidity, allowing investors to buy and sell shares throughout the trading day at market prices.

HLAL ETF: Considerations Before Investing

While the HLAL ETF presents several advantages, it's essential to consider some key factors before investing:
Short-Term Focus: The HLAL ETF is designed for daily returns, not long-term growth. If you have a long-term investment horizon, this may not be the ideal choice.
Volatility: The fund's returns can be volatile, especially when market conditions are turbulent. Be prepared for fluctuations in the value of your investment.
Understanding Derivatives: If you are not familiar with derivatives and their risks, it's advisable to seek professional financial advice before investing in the HLAL ETF.
In conclusion, the HLAL ETF is a unique financial instrument that offers inverse exposure to the basic materials industry. It can be a valuable addition to your portfolio if you understand its objectives and risks and if it aligns with your investment goals. However, always remember that investing involves risks, and it's essential to make informed decisions based on your financial situation and objectives.

Disclaimer: This article is for informational purposes only and does not provide investment advisory services. Please consult with a qualified financial advisor before making any investment decisions.

In this article, we have explored the HLAL ETF, its underlying assets, benefits, and considerations, giving you a comprehensive overview of how this financial instrument works in the world of finance."

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  • What is the HLAL ETF?

    The HLAL ETF is an exchange-traded fund that provides investors with exposure to a specific sector.

  • What is the underlying index that the HLAL ETF aims to track?

    The HLAL ETF aims to track the performance of a specific index, which includes companies involved in its respective sector.

  • What types of companies are included in the HLAL ETF?

    The HLAL ETF includes companies from its focused industry.

  • How does the HLAL ETF work?

    The HLAL ETF functions by pooling investors' capital to purchase a diversified portfolio of sector-related stocks.

  • What are the advantages of investing in the HLAL ETF?

    Investing in the HLAL ETF offers exposure to a specialized sector with potential for growth.