2014 has been a big year for tracker funds. Across the market more investors than ever are using tracker funds. Almost £1 in every £9 invested in a UK fund is in a tracker.
With passive investment at all-time highs we have been looking back over the year, examining the events of 2014 and what trends could continue into 2015.
Investor attention has been concentrated on mature markets
One of the best performing markets has been the US, however please remember past performance is not a guide to the future. The American economy also shows many positive signs - unemployment has been falling and economic growth looks strong. In 2014, many of the best known US indices hit all time highs, including the Dow Jones, the S&P 500 and the NASDAQ index.
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.
Tracker funds are popular for US investing as actively managed funds have traditionally struggled in this area.
Emerging markets have been less popular this year. Whilst emerging market shares performed strongly in the first half of 2014, the region fell sharply in September and has yet to recover its full value. China, where economic growth is falling, is a concern as many emerging countries export goods to China. However it is too early to write off emerging market investments - this is still a diverse sector with many exciting businesses which could outperform in the long run.
One area which surprised positively was gilts. Index-linked gilt funds especially have performed well this year. As interest rates may remain low for the foreseeable future, investors have been keen to buy gilts for their reliable income stream. However their prospects for 2015 will depend on the Bank of England and whether it starts raising interest rates.
Core Tracker List launched
As the popularity of tracker fund investing has grown, more funds have been launched and the decisions for investors have become more complicated. This is why in March 2014 Hargreaves Lansdown launched the Core Tracker list.
The Core Tracker list contains tracker funds which are, in our opinion, the best available in the market. We examined all options and compiled this list with in-depth research, carefully considering how the funds have tracked the index in the past and which are best placed to track well in the future.
The cost of tracker fund investing has fallen in 2014. Many tracker fund managers have reduced costs on their funds and charges keep falling. In November, Legal & General reduced the ongoing annual charge on a number of their tracker funds, including four from our Core Tracker list.
UK shares remain popular
The most popular tracker fund with our clients has been the Legal & General UK Index Fund. It tracks the FTSE All Share Index - the broadest index of UK listed stocks currently covered by tracker funds. Legal & General is our top choice for UK tracker funds - they are one of the largest managers with over 25 years' experience.
Please note there is a tiered charge to hold funds in the Vantage Service with a maximum of 0.45% per annum.
We favour the conservative approach taken by the managers - the fund invests in every stock in the 644 companies in the index. With an Ongoing Charge of just 0.06%, this is the cheapest fund currently available to individuals in the UK. Please remember like all funds the value can fall as well as rise, so investors could get back less than the amount invested.
Performance of key markets in 2014 (GBP)
Data correct to 1 December 2014
Past performance is not a guide to future returns.
The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.