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Index tracker funds

Find out about tracker funds below or see a list of our favourite tracker funds View our favourite tracker funds
Important information - The value of investments can fall as well as rise, so you could get back less than you invest. If you are at all unsure of the suitability of an investment for your circumstances, please seek advice. Once held in a pension money is not usually accessible until age 55 (rising to 57 in 2028).

What is a tracker fund?

If you’re new to investing, or simply looking for convenient, low-cost exposure to shares and bonds, an index tracker fund (also known as a passive fund) could be right for you. These funds aim to replicate, or track, the performance of a stock market index. This is in contrast to an actively-managed fund that will aim to beat the performance of an index.

In the UK, for example, the FTSE All Share is an index of over 600 large, medium-sized and smaller companies. A tracker fund will often invest in every company in the index. This simple approach costs very little and should result in performance that is very similar to the index, although fees will cause the tracker fund's performance to deviate from the index over time. This is why costs are an important consideration, you should also consider plaform charges.

What's the difference between an active fund and a tracker fund?

An active fund will invest in just a few companies in the index, perhaps as little as 30-40, and the aim is to select the companies with the best potential in order to deliver performance that is much better than the index over the long term. This approach is more complex. It involves a great deal of research and costs are higher. We believe there are relatively few good active fund managers around and our favourites can be found on the Wealth 150+.

Some investors prefer the simplicity and low costs associated with tracker funds. There's still plenty of choice on offer, from funds that focus on the UK to those that invest further afield, such as the US and Asia. All tracker funds can be held in an ISA, Lifetime ISA (LISA), SIPP (pension) and a Fund & Share Account.

Need help choosing tracker funds?

Our favourite tracker funds

To help narrow down the choice we have selected our favourite tracker funds across all the major stock and bond markets. You can also browse the full selection of tracker funds available via Hargreaves Lansdown below, and see our latest research and investment ideas.

View our favourite tracker funds

Most popular index tracker funds

Below are the most popular funds chosen by our clients in November 2017, listed in alphabetical order.

BlackRock Consensus 85

HSBC FTSE 250 Index

iShares Emerging Markets Equity Index

Legal & General European Index

Legal & General Global Technology Index

Tracker portfolios

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Frequently asked questions

  • An index tracker fund (also known as a passive fund) aims to track the performance of a particular index; such as the FTSE 100 or the FTSE All Share. They offer a convenient way to gain exposure to a broad range of shares or bonds at a low cost.

  • An index is a basket of shares that represents the performance of a stock market. So, for example, the FTSE 100 contains the largest 100 companies listed on the UK stock market. Most major markets have indices that can be used to track their performance, for example the S&P500 in the US. Normally these indices are run by an independent company who sets the rules on what is included and what proportion of the index each company represents. Often the biggest, most widely traded companies are the biggest holdings in the index.

  • Yes - most tracker funds come as either income or accumulation units. With income units, income is paid out to fund holders as cash. This could provide the investor with an income stream or the cash could be reinvested to buy additional units. With accumulation units income is retained within the fund and reinvested, increasing the price of the units. Generally, for investors who wish to reinvest income, accumulation units offer a more convenient and cost-effective way of doing so.

  • Yes - tracker funds can be used in an ISA, as part of a SIPP or they can be held as standalone investments.

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