Have £1,000 to invest? Here are 3 reasons why I’d buy a FTSE 100 tracker in an ISA today

A FTSE 100 (INDEXFTSE:UKX) tracker fund could offer significant investment appeal in my opinion.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE 100 tracker funds could become increasingly popular over the long run. They offer greater convenience than buying a range of individual shares, while they could prove to be more cost-effective for smaller investors.

Furthermore, a tracker fund helps to spread risk across a large number of stocks. This can reduce company-specific risk and lead to a more favourable risk/reward ratio for an investor.

Of course, buying individual stocks also has its merits, with the prospect of beating the index potentially making it worthwhile over the long run.


Buying units in a FTSE 100 tracker fund is a very simple and straightforward process. An investor needs to decide whether to purchase income or accumulation units, with dividends being paid in the former and being added to the value of the fund in the latter.

As such, there is no requirement to conduct research into the financial strength, growth prospects and valuations of specific stocks. This could lead to time savings that makes a FTSE 100 tracker fund more appealing to time-poor investors.


While the cost of buying shares has fallen significantly in recent years due to the emergence of online sharedealing, building a portfolio of stocks can prove to be expensive – especially for smaller investors.

For example, buying 25 different stocks at a cost of £12 per trade means a total cost of £300. Certainly, regular investing can significantly reduce the cost of buying individual shares, but the cost to sell can be prohibitively high for many investors.

By contrast, a FTSE 100 tracker fund usually charges less than 0.2% per year in management fees. This could make it a more cost-effective option for many investors – especially those who do not have vast amounts of capital at the start of their investing journey.


While it is not possible to diversify away market risk, which is the potential for stock markets to fall, company-specific risk can be reduced through owning multiple stocks.

A FTSE 100 tracker fund equates to exposure to 100 different companies, which means that company-specific risk is significantly reduced. As such, it may offer less risk than a portfolio that contains individual shares, which could make it more appealing to risk-averse investors.

Buying individual stocks

While FTSE 100 tracker funds have appeal, so too do individual shares. The potential for an investor to beat the performance of the wider market could mean that it is possible to generate relatively high returns in the long run. This could mean that you are able to build a larger nest egg and even retire early.

Therefore, for investors with time and capital, individual stocks may prove to be a worthwhile consideration. FTSE 100 tracker funds, though, may present a sound first step in the investing world due to their convenience, low costs and relatively low risks. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

How much passive income could I make for every £1,000 invested in Aviva shares?

Even a relatively small investment in Aviva shares could generate much greater passive income, particularly if the dividends are reinvested…

Read more »

Close-up of British bank notes
Investing Articles

I’m considering 100 shares in this FTSE 250 gem to aim for £300 a month in dividends

Mark Hartley outlines why a lesser-known banking stock from the FTSE 250's worth considering for an income portfolio in 2024.

Read more »

Investing Articles

History suggests these UK shares might soar if interest rates are cut in August

Some UK shares could rocket if interest rates fall from its 5.25% high next month. And there's one our writer…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

Here’s why H1 results could boost the AstraZeneca share price

The AstraZeneca share price has been a success story in the past five years. With H1 results due, can it…

Read more »

Investing Articles

£17,365 in savings? Here’s how I’d use it to target a £6,700-a-month passive income

Here's how a lump sum investment could pave the way for me to make a four-figure monthly passive income in…

Read more »

Investing Articles

Down more than 10% in 6 months, Fools are backing these 5 UK stocks to reverse that – and then some! – by 2025

Some of our UK free-site writers have put forward their candidates for turnaround stocks!

Read more »

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »