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Three tracker funds for 2018 and beyond

5 January 2018

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Investors had a great deal to worry about in 2017. The UK started negotiations to leave the EU, Donald Trump became the most powerful man in the world and elections across Europe threatened the region’s political order.

Despite the uncertainty, global stock markets rose higher and investors who resisted the urge to sell their investments were ultimately rewarded.

As we enter the New Year, I look at three areas that could be set to perform well in 2018 and beyond. Of course, investments should be considered for the long term and they will fall as well as rise in value, so you could get back less than you invest.

The UK

The UK stock market is currently one of the world’s most unloved, and we believe this presents an opportunity.

Great businesses can continue to thrive, even when the economy around them faces challenges. Whatever the outcome of the UK’s Brexit negotiations, the UK will remain home to a number of high-quality businesses. The largest companies will continue to provide their products and services all around the world, while smaller businesses will carry on developing their presence in fast-growing industries.

Our favourite way to gain broad exposure to the UK stock market is the Legal & General UK Index Fund. It tracks the FTSE All-Share, an index of more than 600 UK companies.

It has done this well over the longer term, losing very little value to charges. Hargreaves Lansdown clients benefit from the ultra-low annual management charge of 0.06%. Our service charge of up to 0.45% a year also applies.

Dec 12 -
Dec 13
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Legal & General UK Index n/a* 1.5 1.3 15.9 13.1
FTSE All-Share 20.8 1.2 1.0 16.8 13.1

Past performance is not a guide to the future. Source: Lipper IM to 31 December 2017. *Full year data not available.

Legal & General UK Index KIID

Legal & General UK Index Factsheet

See our latest views on other funds in this sector

Asia and emerging markets

Investors willing to take more risk could consider Asia and emerging markets. They’re some of the fastest-growing economies in the world, where a growing population and swelling middle-class could fuel consumer demand for years to come.

The disparate nature of these markets is also attractive. Each country is at a different stage of economic development, and has its own set of economic strengths and weaknesses. We therefore think a diversified approach is sensible.

The iShares Emerging Markets Equity Index Fund invests in hundreds of companies listed in over 20 countries in the FTSE All-World Emerging Index. It’s our favourite way to invest broadly across Asia and emerging markets, and is available to Hargreaves Lansdown clients at just 0.23% annually, in addition to our 0.45% per year service charge.

Dec 12 -
Dec 13
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
iShares Emerging Markets Equity Index n/a* n/a* -12.0 36.3 20.6
FTSE All-World Emerging Index -5.5 7.6 -10.8 36.7 20.9

Past performance is not a guide to the future. Source: Lipper IM to 31 December 2017. *Full year data not available.

iShares Emerging Markets Equity Index KIID

iShares Emerging Markets Equity Index Factsheet

See our latest views on other funds in this sector

Japan

Following a number of years in the doldrums, the Japanese economy recently recorded its seventh consecutive quarter of economic growth – its longest run of growth since 2001.

Japan is the world’s third-largest economy and is famed for its excellence in technological innovation. It’s home to hundreds of global companies such as Canon, Toyota, Sony and Nintendo as well as a number of lesser-known businesses that are leaders in their field.

The Japanese stock market has performed strongly in recent years but one of our favoured measures of valuation, the cyclically adjusted price-to-earnings ratio, currently suggests it is among the cheapest markets globally. It’s valued well below its long-term average.

This could provide an opportunity to invest at depressed valuations, although unloved areas can remain out-of-favour for long periods, and it’s impossible to rule out market falls in future.

Our favourite way to track the Japanese stock market is the iShares Japan Equity Index Fund. The fund holds every stock in the FTSE Japan index to ensure close tracking and the annual management charge is exceptionally low at just 0.11%. Our service charge of up to 0.45% a year also applies.

Dec 12 -
Dec 13
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
iShares Japan Equity Index n/a* n/a* 14.2 24.2 14.7
FTSE Japan 24.95 2.7 17.6 22.7 14.4

Past performance is not a guide to the future. Source: Lipper IM to 31 December 2017. *Full year data not available.

iShares Japan Equity Index KIID

iShares Japan Equity Index Factsheet

See our latest views on other funds in this sector

This article is not personal advice. If you are at all unsure of the suitability of an investment for your circumstances, please contact us for advice.

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    Investment notes
    No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.
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