Horror stories such as the recent Woodford funds debacle will only serve to make index tracker funds more popular, I reckon.
The problem with trusting a fund manager with your investment money is that it’s hard to pick a good one. Who’d have believed just a few short years ago that a previously successful manager such as Neil Woodford, with a robust reputation for outperforming the market, would crash and burn so spectacularly?
Yet even less dramatic underperformance can drastically affect your long-term investing outcome, because high ongoing fees levied by managed funds make it harder to earn positive returns from your fund investments.
The solution for many private investors is to go it alone and pick their own shares. But thousands of others participate in the index tracker fund ‘revolution’. Indeed, there has never been such a wide range of these low-cost, passive, and uncomplicated investment funds available, and they are easily accessed via platforms such as that offered by Hargreaves Lansdown and others.
Here are five of my favourites. Each offers a particular approach to investing in the stock market and they are all run by solid and well-known investment firms.
HSBC FTSE 250 Index
The UK’s FTSE 250 index is made up of the 250 largest companies, after the 100 largest (which are in the FTSE 100 index) stock-market-listed companies in the UK. This fund aims to follow the performance of the index by investing in the shares of all the companies in it.
Generally, we can aim for more growth with the FTSE 250 than we can with the FTSE 100.
Vanguard FTSE UK All Share Index
If you want to widen your fund investment to cover more of the UK stock market, this tracker does the job. It follows the fortunes of the FTSE All-Share index, which includes firms with large, medium and small market capitalisations.
It aims to track the performance of the index by investing in a “representative sample of index constituent securities.”
Legal & General European Index
Looking beyond the markets in the UK, you can follow the fortunes of the FTSE World Europe ex UK Index with this fund, which excludes firms in the UK. The fund seeks to replicate the index, which includes firms with middle and large market capitalisations in the developed and advanced emerging markets in Europe.
Vanguard US Equity Index
You can track the fortunes of well-known US stock market names such as Microsoft, Apple, Amazon, Facebook and many others with this tracker, which aims to replicate the performance of the Standard and Poor’s Total Market Index.
The index has firms with market capitalisations in the full range from micro to large. And the fund tracks the performance of the index by investing in a representative sample of constituent stocks.
Legal & General Global Technology Index
You can focus your investment in the area of information technology with this tracker. The objective of this fund is to provide growth by tracking the performance of those companies in the FTSE World Index that are engaged in information technology activities.
That remit includes some of the largest companies in the world, and if you think the sector is set to continue its outperformance, this could be the tracker for you.