Asalamu Alaykum Warahmatullahi Wabarakatuh. I hope this message reaches everyone in the best of Emaan and health. I’m a complete beginner with investing and I was wondering how the HSBC Islamic Global Equity Index Fund BD GBP is calculated with a 25.96% annual return? Also how likely is it to achieve this return.
JazakAllah Khayr
W Salam Abdul Samee
We all started as beginners once upon a time, and you are definitely moving in the right direction alhamdullillah.
To answer your two questions:
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The annual return would have been calculated by taking the market price today, and dividing it by the market price from a year ago. Thus giving you an annual capital return.
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The likeliness of future returns are difficult to predict. The HSBC Global Equity Index is mainly made up of large cap technology stocks in the US (Apple, Facebook, Google etc.,). This asset class has historically (over the last decade) done very well compared to the rest of the stock market. However, past performance is not an indication of future returns. In general however, the stock market has produced around 5-10% annual returns over a century, even after taking into inflation.
I hope that has answered your question brother. I myself have been an investor in this fund for a couple of years and intend to continue to do so, but only with money that I won’t need for at least a few years. Short term returns can be volatile, but in the long run equities have a track record of being a good place for your capital.
Salaam,
Shaheak
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Wonderful reply brother @Shaheak_Choudhury
I would just add that any market weighted global index will have a tilt to tech sector and also to USA so its not just HSBC fund. If you Search couple of other conventional global equity index, directionally they should have the similar concentration as HSBC islamic fund.
I sometimes hear that HSBC is tech and US heavy. This is because US is the biggest economy of the world and tech companies have a very high market valuation. So what one should decide is if they want to stick to passive index investing such as HSBC or try to actively manage by stock picking or picking up sector based funds.
I am a believer of longterm passive index fund investing (invested in HSBC therefore) but also play with stocks with minor amount to spice up things 
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Jzk brother @Zeeshan! I have read many of your posts on this forum, and they have all been incredibly insightful and have helped tremendously on my investing journey (and I’m sure the same can be said for many other brothers too).
It is an interesting discussion point re: HSBC Islamic fund and their US Tech exposure. A quick Morningstar search suggests that exposure to US in this fund is 73%, and exposure to tech is 33%. If we compare to Vanguard Global All Cap, the comparable %'s are 57% / 20%. If we compare to another popular shariah compliant global index (ISWD), the %s are 50% / 18%.
Personally, I don’t mind the additional tilt towards US and Tech - I can’t foresee many scenarios where having a US/Tech bias would harm your investment portfolio. But would you not say that a more ‘conservative’ investor would be better suited in ISWD or Vanguard All Cap? I assume HSBC’s more concentrated portfolio is likely driving these differences, which again may be a sticking point for our imaginary conservative investor friend.
I still need to venture into individual stocks! Which companies are you liking at the moment?
Salaam,
Shaheak
JazakAllah Khayr Brother @Shaheak_Choudhury for your very informative reply. I found it very useful and beneficial. It’s nice that you have added your own personal experience, In Shaa Allah I plan to use savings that I won’t need for a couple of years. Do the stocks pay out dividends annually or quarterly in cash?
JazakAllah Khayr Brother @Zeeshan for your valuable input also. A very good suggestion, I plan to learn more about stocks first then pick out a few to invest some smaller funds into In Shaa Allah. Maybe IFG fund replicator is good for helping with this? Or is also a fund index similar to the HSBC one?
May Allah Azzawajal bless our wealth and make it a means to gain his pleasure. Ameen
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My pleasure akhi @AbdulSamee3 - it pays out dividends annually. However, the yield is not amazing, so I have not really been keeping track of annual income. I wouldn’t say this is the fund to own if you are looking for regular income.
Ameen - hope we are always able to keep this intention of using our wealth for the pleasure of Allah.
Ameen.
I’m not looking for regular income from it I was really asking for the purpose of finance projections and calculations etc. It seems quite decent actually I’m looking forward to it In Shaa Allah
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apologies brother @Shaheak_Choudhury as i missed this one - better late then never
What you need to note is that HSBC is a large-cap market-weighted growth fund for ~100 companies as it follows the Dow jones 100 titan index whereas Vanguard is the “all cap” index so will be more diversified as you alluded (the problem is that it’s not shariah compliant so go out of the equation
HSBC is a market-weighted index whereas ISWD calculates its financial screening on an asset value and as a result, gives a different tilt to the fund’s constituents. You may find the below discussion useful.
Regards
Zeeshan