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Three trackers for 2019 and beyond

Tracker funds can be a great, low-cost way to invest. Here are some of our favourites.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

2018 was a rollercoaster ride for investors.

The news was dominated by Brexit negotiations and political posturing. But there was no clarity on whether we’d agree a deal with the EU on things like trade and customs. If there’s one thing stock markets hate, it’s uncertainty. It meant the UK was home to one of the world’s worst-performing major stock markets.

Brexit wasn’t the only thing on investors’ minds. There were also worries that rising interest rates in the UK and US could put the brakes on economic growth by adding to borrowing costs.

Donald Trump’s tariffs on Chinese imports to the US added to global uncertainty, and risked sparking a trade war between the world’s two biggest economies. Asian and emerging stock markets paid the price while the US was one of the world’s only major stock markets to make money for UK-based investors.

With 2018 behind us, I look at three areas that could be set to perform well in 2019 and beyond. Of course, investments should be made with the long term in mind. We suggest at least five years. They will fall as well as rise in value, so you could get back less than you invest. These investment ideas are designed to help you choose your own investments, they aren’t personal advice. If you’re not sure an investment is right for you please take advice.

No place like home?

The UK stock market is currently hated by investors. They’ve pulled billions of pounds out of UK funds since the Brexit vote, and lots of it’s been reinvested overseas. But we don’t think they should be so quick to jump ship.

Consumers will carry on buying goods, and use other services, Brexit or no Brexit. That’s why we’re confident lots of companies will still be able to make money throughout periods of turmoil, just as they’ve done in the past. We think this will drive share prices in the long run.

Even if you’re worried about the UK economy, the UK’s biggest companies make almost three quarters of their money overseas. That means their fate isn’t heavily tied to the UK’s fortunes.

Not only that, there are plenty of companies paying an attractive income which makes the UK one of the world’s highest-yielding stock markets.

Our favourite way to get 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 650 UK companies.

It’s tracked the index well over the longer term, and hasn’t lost much value to charges. HL clients get the ultra-low annual management charge of 0.04%. Our platform charge of up to 0.45% a year also applies.

Annual percentage growth
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Legal & General UK Index 1.5% 1.3% 15.9% 13.1% -8.9%
FTSE All-Share 1.2% 1.0% 16.8% 13.1% -9.5%

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018.

Find out more about this fund, including charges

Legal & General UK Index KEY INVESTOR INFORMATION

Emerging opportunities

Investors willing to take more risk could consider emerging markets.

They cover a broad range of regions – from Asia and Eastern Europe to South Africa and Latin America. Each has a different set of economic strengths. Some are rich in commodities and natural resources; some are among the world’s leading exporters; and others have a vibrant consumer-driven society.

They’re some of the fastest-growing economies in the world and their growing middle class populations could fuel consumer demand for years to come.

Emerging markets are a volatile place to invest though and it’s more risky to invest here than in developed markets. That’s why we think a broad, diversified approach is sensible.

The iShares Emerging Markets Equity Index invests in more than a thousand companies listed in over 20 countries in the FTSE All-World Emerging Index. It also invests in smaller companies which have the potential to perform well over the long run, but are higher-risk.

It’s our favourite way to invest broadly across emerging markets. And it’s available at just 0.23% annually for HL clients. That’s in addition to our 0.45% per year service charge.

Annual percentage growth
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
iShares Emerging Markets Equity Index 6.5% -12.3% 35.9% 20.2% -8.6%
FTSE Emerging 7.9% -10.3% 35.4% 21.1% -7.6%

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018.

Find out more about this fund, including charges

iShares Emerging Markets Equity Index KEY INVESTOR INFORMATION

Universal appeal

If you don’t want to guess which market or region will do best from one year to the next, why not spread the risk by investing globally?

It’ll let you invest in a diverse range of areas from America and China’s cutting-edge technology sectors, Japan’s leading consumer electronics companies to Eastern Europe’s natural resources businesses.

The Legal & General International Index is one of our favourite ways to do it.

It tracks the FTSE World (excluding UK) Index and invests in more than 2,300 companies across the globe, including higher-risk emerging ones. The only major market it doesn’t invest in is the UK, so it could be a good option if you’re worried about the UK’s prospects.

The annual charge is an exceptionally low 0.08%. Our annual charge of up to 0.45% to hold funds also applies.

The fund has successfully tracked its index since launch in March 2008. It hasn’t lost much to annual charges. We think it could bring diversification to a UK-focused portfolio, or it could be a great first step to investing overseas.

Annual percentage growth
Dec 13 -
Dec 14
Dec 14 -
Dec 15
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Legal & General International Index 12.6% 3.9% 30.3% 12.7% -4.1%
FTSE World ex UK 12.3% 4.8% 30.4% 13.5% -2.7%

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018.

Find out more about this fund, including charges

Legal & General International Index KEY INVESTOR INFORMATION

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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