This is our latest update on the best low cost index trackers now on the market. It replaces any previous versions. Note: We don’t include platform exclusive funds – they’re generally not a good deal overall.
Low costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.
As Morningstar puts it:
If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.
That’s why I try to leave no penny un-pinched when searching for cheap funds.
I presented my then top, low cost picks in the lazy portfolio post. But it’s nice to have a choice.
So, for your ascetic delight and entertainment, I bring you: Britain’s cheapest index trackers and their next best alternatives.
As an avowed passive investor, I’m concentrating purely on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available.
I’m also sticking to the broad market categories recommended in the lazy portfolios. They offer ample diversification at a low cost. I’m not into kinky stuff like short Brazilians.
My picks are based purely on price as measured by the Ongoing Charge Figure (OCF), and any other upfront fund fees that may apply. There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.
Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.
Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.
The UK’s best low cost index trackers
Right, let’s grab some bargains!
Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for accumulation funds variants where available.
Domestic large cap equity
Cheapest
-
iShares UK Equity Index Fund D (GB00B7C44X99) OCF 0.06%
Next best
- HSBC FTSE All Share Index C (GB00B80QFX11) OCF 0.07%
- Vanguard FTSE UK All Share Index Trust (GB00B3X7QG63) OCF 0.08%
- Fidelity Index UK Fund W (GB00BLT1YM08) OCF 0.08%
Domestic mid cap equity
Cheapest
- Vanguard FTSE 250 ETF (VMID) OCF 0.1%
Next best
- L&G UK MID Cap Index Fund I (GB00BQ1JYX87) OCF 0.14%
- db X-trackers FTSE 250 ETF (LU0292097317) OCF 0.15%
Domestic small cap equity
There are no good tracker options in the UK small cap asset class for DIY investors. Of the funds listed below, the iShares ETF is more of an expensive FTSE 250 tracker, and the rest are active funds.
Cheapest
- Schroder Institutional UK Smaller Companies (GB0007893984) OCF 0.52%
Next best
- iShares MSCI UK Small Cap (CUKS) OCF 0.58%
- Baillie Gifford British Smaller Companies B (GB0005931356) OCF 0.67%
- Aberforth Smaller Companies Trust (ASL) OCF 0.80%
Domestic value equity
Most UK tracker options are only an approximation of this asset class:
Cheapest
- 7IM UK Equity Value Fund C (GB00BWBSHV64) OCF 0.35%
Next best
- Vanguard FTSE UK Equity Income Index (GB00B59G4H82) OCF 0.22%
- WisdomTree UK Equity Income ETF (WUKD) OCF 0.29%
- PowerShares FTSE UK High Dividend Low Volatility ETF (UKHD) OCF 0.39%
Note: The 7IM fund takes the top spot because it’s the one UK tracker that explicitly follows a value methodology. The remainder are high-yielding funds, not true value funds. A high-yielding fund is a distant cousin of value and not always a pretty one at that. Pure value funds are available in the UK through Dimensional Fund Advisors, but only via an associated IFA who will charge you fees.
World equity
Cheapest
- L&G Global 100 Index Trust I (GB00B0CNH056) OCF 0.14%
Next best
- Fidelity Index World Fund I (GB00B7LWFW05) OCF 0.15%
- HSBC MSCI World ETF (HMWO) OCF 0.15%
- HSBC FTSE All-World Index Fund C (GB00BMJJJG09) OCF 0.21%
The HSBC index fund contains an emerging market component. The rest cover the developed world only.
World value equity
Cheapest
- Vanguard Global Value Factor ETF (VVAL) OCF 0.22%
Next best
- db x-trackers MSCI World Value Factor ETF (XDEV) OCF 0.25%
- iShares Edge MSCI World Value Factor ETF (IWVL) OCF 0.3%
- Lyxor SG Global Value Beta ETF (SGVL) OCF 0.4%
World small cap equity
Cheapest
- Vanguard Global Small-Cap Index Fund (VIGSCA) OCF 0.38%
Next best
- SPDR MSCI World Small Cap ETF (WOSC) OCF 0.45%
International ex-UK equity
Cheapest
- L&G International Index Trust I (GB00B2Q6HW61) OCF 0.13%
Next best
- Vanguard FTSE Dev World ex-UK Equity Index (GB00B59G4Q73) OCF 0.15%
- Aviva Investors International Index Tracking SC2 (GB00B2NRNX53) OCF 0.31%
- db x-trackers FTSE All-World ex-UK (XWXU) OCF 0.4%
You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.
Emerging markets equity
Cheapest
- db X-trackers MSCI Emerging Markets Index ETF (XMME) OCF 0.20%
- Amundi ETF MSCI Emerging Markets ETF (AUEM) OCF 0.20%
Domiciled in France – subject to withholding tax.
Next best
- Fidelity Index Emerging Markets Fund W (GB00BLT1YT76) OCF 0.23%
- iShares Emerging Markets Equity Index Fund D (GB00B84DY642) OCF 0.24%
Socially responsible investing
Cheapest
- UBS (Irl) ETF – MSCI United Kingdom IMI Socially Responsible ETF (UKSR) OCF 0.28%
Next best
- L&G Ethical Trust I (GB00B0CNH940) OCF 0.31%
- Vanguard SRI Global Stock Fund (IE00B76VTN11) OCF 0.35%
- iShares Sustainable MSCI Emerging Markets SRI ETF (SUSM) OCF 0.35%
Multi-factor
Cheapest
- Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) OCF 0.4%
Next best
- Lyxor JP Morgan Multi-Factor World Index ETF (LYXW) OCF 0.4%
- iShares Edge MSCI World Multifactor ETF (IFSW) OCF 0.5%
- Source Goldman Sachs Equity Factor Index World UCITS ETF (EFIW) OCF 0.65%
Property – UK
Cheapest
- iShares FTSE EPRA/NAREIT UK Property ETF (IUKP) OCF 0.4%
- iShares MSCI Target UK Real Estate ETF (UKRE) OCF 0.4%
Next best
- No index fund alternative
Property – global
Cheapest
- L&G Global Real Estate Dividend Index I (GB00BYW7CN38) OCF 0.2%
Next best
- iShares Global Property Securities Equity Index Fund D (GB00B5BFJG71) OCF 0.22%
- Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) OCF 0.24%
- SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%
Includes emerging markets exposure.
All-commodities
Cheapest
- Source Bloomberg Commodity ETF (CMOP) OCF 0.19%
Next best
- ETFS Longer Dated All Commodities Go ETF (CMFP) OCF 0.3%
- Lyxor Commodities Thomson Reuters/CoreCommodity CRB TR ETF (CRBL) OCF 0.35%
Gold
Cheapest
- iShares Physical Gold ETC (SGLN) OCF 0.25%
Next best
- Source Physical Gold ETC (SGLD) OCF 0.29%
- db Physical Gold ETC (XGLD) OCF 0.29%
Gold trackers are Exchange Traded Commodities (ETCs).
UK Government bonds – intermediate duration
Cheapest
- Lyxor FTSE Actuaries UK Gilts (GILS) OCF 0.07%
Next best
- Vanguard UK Government Bond ETF (VGOV) OCF 0.12%
- SPDR Barclays Capital UK Gilt ETF (IE00B3W74078) OCF 0.15%
- Vanguard UK Gov Bond Index (IE00B1S75374) OCF 0.15%
- L&G All Stocks Gilt Index Trust I (GB00B8344798) OCF 0.15%
UK Government bonds – long
Cheapest
- SPDR Barclays Capital 15+ Year Gilt ETF (IE00B6YX5L24) OCF 0.15%
- Vanguard UK Long-Duration Gilt Index fund (GB00B4M89245) OCF 0.15%
UK Government bonds – short
Cheapest
- Lyxor FTSE Actuaries UK Gilts 0-5Y ETF (GIL5) OCF 0.07%
Next best
- SPDR Barclays Capital 1-5 Year Gilt ETF (IE00B6YX5K17) OCF 0.15%
- iShares UK Gilts 0-5 ETF (IGLS) OCF 0.2%
UK Government bonds – index-linked
Cheapest
- Lyxor FTSE Actuaries UK Gilts Inflation-Linked (GILI) OCF 0.07%
Next best
- Vanguard UK Inflation Linked Gilt Index fund (GB00B45Q9038) OCF 0.15%
- L&G All Stocks Index Linked Gilt Index Trust I (GB00B84QXT94) OCF 0.15%
- iShares Index Linked Gilt Index Fund D (GB00B83RVT96) OCF 0.16%
International government bonds
Cheapest
- iShares Overseas Government Bond Index Fund D (GB00B849C803) OCF 0.17%
Next best
- iShares Global Government Bond ETF (IGLO) OCF 0.2%
- iShares Global AAA-AA Government Bond ETF (SAAA) OCF 0.2%
- db X-trackers Global Government Bond ETF (XG7S) OCF 0.2%
International bonds hedged to £ (government and corporate)
Cheapest
- Vanguard Global Bond Index (IE00B50W2R13) OCF 0.15%
Hedged back to Sterling.
Next best
- Vanguard Global Short Term Bond Index (IE00BH65QG55) OCF 0.15%
Hedged back to Sterling.
- db X-trackers Global Government Bond ETF (XGSG) OCF 0.25%
Hedged back to Sterling.
International inflation-linked bonds hedged to £
Cheapest
- db X-trackers Global Inflation Linked ETF (XGIG) OCF 0.25%
Hedged back to Sterling.
Next best
- L&G Global Inflation Linked Bond Index I (GB00BBHXNN27) OCF 0.27%
Hedged back to Sterling.
UK Corporate bonds
Cheapest
- L&G Sterling Corporate Bond Index Fund I (GB00B4M01C47) OCF 0.14%
Next best
- L&G Short Dated Sterling Corporate Bond Index Fund I (GB00BKGR3H21) OCF 0.14%
- Vanguard UK Investment Grade Bond Index (IE00B1S74Q32) OCF 0.15%
- iShares £ Ultrashort Bond ETF (ERNS) OCF 0.09%
Note: The iShares ETF doesn’t take top spot because it’s a specialist ultrashort bond tracker with a duration of a third of a year. Not for general use but could be handy for deaccumulators.
Concluding thoughts on low cost trackers
If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading that lot.
This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick short-cut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.
We only update this post periodically. Please bear in mind the quoted OCFs may date as fund groups fight their turf wars by undercutting each other (hurrah). But this list should still prove an excellent starting point for your research.
And if anyone comes across any better index tracker options I’d love to hear about them in the comments below.
Take it steady,
The Accumulator
Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.
from Monevator http://monevator.com/low-cost-index-trackers/
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