Returns from £5,000 invested at start-year in various index-tracker funds.
- Start Year
Return % is average rate of return in real terms after taking UK CPI inflation and platform charges into account.
Other funds tracking the same index should have similar returns.
Index-Tracker funds based on ISAs
Index-tracker funds should have no initial charge and
annual charges which are lower than those for actively-managed funds.
With an index-tracker you minimize your time researching individual funds.
Research from the US says trackers on average, overall, out-perform actively-managed funds. But by their nature they do not achieve better returns than their benchmark index.
Invest in funds tracking the broadest indexes.
Invest for the long-term. Remain a passive investor, do not keep chopping and changing funds incurring fees as you go.
Warren Buffett on advantages of Index-Trackers
Growth of Index-Tracker Funds
Growth of passive funds, both index-tracker funds and index-tracker exchange-traded funds
has been a feature of the last few years.
Fund Platform Charges
It seems buying an index-tracker ISA direct from the provider is increasingly phased out and replaced by buying via a fund platform.
Using a fund platform adds an additional annual charge though this may be offset by lower fund charges negotiated by the platform provider.
Websites which compare platform charges:
thisismoney and go to the DIY INVESTING ISA CHARGES table near the top of the page.
monevator maintained by investment enthusiasts.
Monevator has lots on Passive Investing (passive investing is another name for investing in index-tracker funds).
Easier reading, lighter style than this page.
comparefundplatforms another calculator from Candid Money.
Searching for Suitable Index-Tracker Funds
Vanguard 'what we offer', index and active funds enquiry. Good information, easy to use, designed for a UK audience.
You do not need to be a Vanguard customer to use the enquiry.
Vanguard platform only covers Vanguard funds.
Vanguard platform has the lowest admin charge(0.15%) and Vanguard index funds have low annual charges.
BlackRock UK Investment funds for individuals - from about 170 index (passive) funds. Good search tool with good performance data
shown on the first page.
Fidelity UK Investment finder - from about 180 index (passive) funds. Helpful search tool
backed by good performance data.
Legal & General In 2021 Legal & General transferred administration of its personal investing
business to Fidelity.
HSBC UK Online fund platform.
Hargreaves Lansdown Search index tracker funds enquiry. Good information, easy to use, designed for a UK audience.
You do not need to be a Hargreaves Lansdown customer to use the enquiry.
Number of indices upon which index-tracker funds can be benchmarked has increased over the years.
Some indexes have become very specialised. Best to stick with indexes from major providers such as FTSE, MSCI, S&P, and look for funds with at least five years past performance figures.
Defined Contribution Pensions vs ISAs
We now own our own pensions. George Osborne's 2014 budget removed many restrictions on pension-pot withdrawls
for people retiring after April 2015.
Pension contributions are free of tax but not national-insurance.
A 25% tax-free lump-sum can be taken when the pension is cashed-in: whether drawdown or annuity.
Tax advantages make pensions the most attractive savings option, better than ISAs.
Employer contributions increase the attraction.
All this assumes you are not a nurse or teacher with a defined benefit pension.
If you already receive maximum employer pension contribution and you are under 40, George Osborne's 2016 budget
announcing Lifetime ISA's is of interest.
From April 2017, people 18-to-40 can start an ISA account, investing up to £4,000/year and receiving 25% from government, max £1,000/year, at the end-of-each tax-year. 25% rebate continues up to age 50.
Last updated 09 January 2022.